2016 Outlook For Automotive M & A

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The 2016 Outlook for Automotive M&A
The easy-money policy of the Federal Reserve and the cash-swollen balance sheets of corporations and private equity firms alike contributed to an explosion of deal-making in 2015. Long term growth in vehicle production and the positive outlook for vehicle sales over the next five years have made automotive one of the leading sectors for M&A. We expect deal activity in the automotive sector to remain strong during 2016, but to taper off from 2015 levels. The biggest factor that will suppress deal activity this year is the impending interest rate increase by the Federal Reserve. Other deal-squelching factors include geopolitical instability (e.g., in the Middle East and Russia) and the relative scarcity of companies that can be purchased at bargain prices.
Favorable Conditions Exist for Automotive M&A
Even though macroeconomic factors will have a chilling effect on deal activity, automotive is likely to remain one of the hottest sectors for M&A. During its resurgence over the past five years, the automotive industry has been highly profitable. In addition, the growth prospects for the industry are favorable, especially in light of the overall low-growth economic environment. Despite the recovery, economic growth in the U.S. and overseas has been stagnant. Average GDP growth in the U.S. over the past five years is at 2.4 percent. Other leading world economies such as Japan, Germany, and the United Kingdom have likewise experienced

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