Autotech & Mobility: 2022 Valuation Multiples

7 November 2022

“Autotech” describes all of the digital components of modern cars that are on a steady path to render the combustion engine obsolete.

reports :

The automotive industry—a century-old market that once revolved around a small number of heavily consolidated players (Ford, Daimler, VW, BMW…) and their subsidiaries—has seen unprecedented disruption throughout the last two decades, under the umbrella term “Autotech” which describes all of the hi-tech, digital components of modern cars that are on a firm path to render the combustion engine completely obsolete in the near future.

The key drivers of the huge transformation this market has seen are certainly electrification and digitisation. These two movements, led by a global effort to combat climate change on the one hand, and from wider user-experience trends on the other, were embodied first and foremost by electric car manufacturer Tesla—the largest car company by market cap as of today—which pioneered the “smartphone-on-wheels” design that made electric vehicles (EVs) rise to prominence.

Tesla didn’t just change the way cars are made, but also the way they are sold and maintained. With a fully D2C approach, Tesla’s sales process mostly takes place online, drastically reducing the cost of sale per vehicle. They began selling optionals on a subscription-basis as well as delivering over-the-air software updates to carry out safety checks, maintenance and to manage recalls for which traditional automakers would require physical fixes.

Finally, Tesla—together with independent players such as Waymo and Baidu—began investing heavily into self-driving technology, the latest trend that promises to further revolutionise the industry by removing the need for a human driver.

All these extremely R&D-intensive innovations led to the rise of a huge number of start-ups and scale-ups looking to develop each individual component that makes this huge industry shift possible: software to optimise range, assist driving, deliver updates and manage sales, as well as hardware to gather sensor data, increase battery capacity and efficiency, and provide charging points.

As traditional automakers realised they had to keep up with the disruptors, many of them adopted aggressive M&A strategies to acquire or partner with up-and-coming Autotech companies to integrate their cutting-edge technologies into their smart vehicles.

M&A Consultancy firm Hampleton Partners released their latest Autotech & Mobility Report, providing an in-depth analysis of the most recent M&A and valuations trends in the space.

Firstly, Hampleton Partners found that the first half of 2022, with 64 announced deals, has marked an all-time high in terms of M&A volume. 40 of these deals involved companies going public via SPAC, proving it is still a sector-favourite exit route.

Trailing 30-months EV/Revenue multiples showed a median of 3.2x in H1 2022, a 3-year high. However, values within the 64 announced deals were pretty evenly distributed between 0.1x to 7.4x—quite a wide range underlining how different sub-sectors and deals may lead investors to calculating valuations differently.

The report shows that nearly half of the deals involve enterprise applications, including dealership management software, CRMs and Product Lifecycle Management solutions. The second segment by number of deals is Embedded Software and Systems, followed by Mobility & Fleet Management and Internet Commerce & Content.

Hampleton Partners’ research also highlights how the market penetration of Autotech, EVs and digitised mobility has been deeper where aided by governments’ assertive policy action, such as the EU’s ban of petrol and diesel car sales by 2035, as well as infrastructural initiatives to make the technology more widely available, such as heavy investment in EV charging points and opening up charger tech across brands. However, while the sector’s growth has suffered the worldwide chip-shortage, it has also contributed to it through so-called “feature-bloat“.

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