After a turbulent two years in the automotive industry due to the global financial crisis, OEMs are once more turning to M&A activity as a means of achieving strategic growth and creating value, according to industry experts at PricewaterhouseCoopers (PwC) LLP.

A new report published by PwC, entitled 'Drive value - Automotive M&A Insights' forecasts that M&A activity will play an important role in helping vehicle and other automotive sector manufacturers to make the changes needed to ensure their short-term survival and achieve growth in the longer term.

Andy Watts, director and automotive sector expert at PricewaterhouseCoopers, Midlands, said:

"Strategic M&A activity is expected to pick up this year because more companies are in a better position to finance discretionary deals. This could create opportunities for mid tier suppliers and global OEMs alike.

"The automotive industry still needs to consolidate across many parts of its value chain to improve insufficient returns, achieve scale to afford the R&D required by the changing and innovating industry, and eliminate excess capacity. Refocusing on strategic M&A activity could help to bring about these changes."

According to PwC's report, automotive M&A deal value increased sharply in 2009 compared to the previous year, despite a small decrease in the number of transactions. Most of this activity was distress-driven - large-scale restructurings involving financial buyers. Conversely, more conventional methods of deal financing like cash, debt and equity exchanges became less feasible as strategic investors sought to conserve capital.

Looking ahead, the outlook for the automotive sector remains uncertain and dependent on a number of factors. Andy Watts, director and automotive sector expert at PricewaterhouseCoopers, Midlands, concluded:

"Before deal activity in the sector can get back to normal, however, we will need to see some sustained improvement in the credit markets and a revival in customer demand for cars. Companies involved in recent restructurings will also need some time to complete their plans.

"Positive news about new car sales in the UK being up 10.8% in June compared to the same month last year is certainly a positive indicator more strategic M&A activity may soon be on the way."