Consolidation in the European automotive aftermarket

Consolidation in the European automotive aftermarket

June 28, 2018

Market for spare parts and accessories: Disruption offers opportunities for auto parts players and investors alike

Europe's automotive aftermarket is experiencing a radical phase of consolidation. Mergers and acquisitions are on the rise and the number of big deals is increasing too. At the same time we are seeing more firms going bust, with insolvencies up nine percent between 2016 and 2017 alone. Taking the right action now can enable firms to turn the disruption to their own benefit and improve their chances on the market.

The number of vehicles on Europe's roads is constantly rising, which keeps the market for spare parts growing – at a pace of one to two percent per year. But the industry is simultaneously experiencing massive disruption: New market players are bringing in innovative business models, while digitalization demands additional adaptations. The result is the wholesale consolidation of an industry that is still highly fragmented: Europe's three leading aftermarket players together control just 15 percent of the market – the top three in the US boast a combined market share of almost 50 percent.

It may be fragmented today, but consolidation in Europe's aftermarket is well underway.
It may be fragmented today, but consolidation in Europe's aftermarket is well underway.

Big players earn double the return of the smaller fish in the pond

Disruption is in full swing: The European automotive aftermarket has seen at least 65 M&A deals since 2005, the number rising dramatically in the past three years (with 15 deals recorded in 2017 alone). Of the 65 deals, 39 were cross-border in nature. The big auto parts distributors from North America are becoming increasingly active in Europe, being involved in 20 of the 65 acquisitions. Also on the rise are mega-deals with the involvement of the big players. They like to buy up smaller firms but their acquisitions can involve their large industry peers, too.

Internationally operating auto parts distributors are already leading the pack and shaping the European market. Boasting annual revenues of over a billion euros coupled with stable growth, they have the necessary scale, purchasing power and distribution strength. Unsurprisingly, their EBITDA margins of four to five percent position them at the top end of their industry peers. Smaller companies with up to 100 million euros in revenues manage just two to three percent margin, by contrast. This puts them under particular pressure in the market and more of them go bust as a result: the number of insolvencies rose nine percent between 2016 and 2017 alone.

Most of the mergers and acquisitions are undertaken by strategic investors keen to improve their own position on the market, develop new markets or realize economies of scale. Another reason for the increase in M&A deals in the sector is the presence of financial investors: there has been increasing involvement of private equity firms in the market since 2012 because of the good-value investment opportunities to be found in the industry.

Active players profit

The consolidation phase is not expected to end any time soon – quite the reverse, in fact. Market players must therefore ask themselves how they can use the disruption within their industry to evolve their own businesses. Opportunities abound, not only for the big players doing the acquiring, but also for the targets, for reasons including the fact that they will emerge from a merger stronger than before as a result of economies of scale.

The first thing companies should do is keep a close eye on what's going on in the market and analyze the options open to them. Questions they need to ask themselves include: How big is my business and where do I fit in to the market? Can I acquire a rival firm myself? What is my value chain like – do I need to add or get rid of certain links? What strategy promises success in dealing with new players such as online platforms and in the face of digitalization? Are there potential partnerships or investments to be entered into? Based on the answers to these questions, companies can develop and implement measures such as changes to the product and service portfolio, establishment of the online business, joint ventures or a strategy of expansion.

The key is to develop an awareness of the best course to chart to successfully ride the consolidation wave. Companies need to be agile and open to changes because they must not allow themselves to freeze like rabbits in the headlights. They need to take the future of their business in their own hands. Then they will emerge the stronger for all the disruption in the automotive aftermarket today.

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Consolidation in the European automotive aftermarket


Mergers and acquisitions are on the rise in the highly fragmented market for automotive spare parts: the big players are getting bigger, but more and more financial investors are getting in on the action. Companies that position themselves before it's too late can benefit from the disruption.

Published June 2018. Available in
Further reading
Portrait of Hasmeet Kaur
Partner, Global Managing Director
Munich Office, Central Europe