Mergers and Acquisition in EV Charging Industry
The global automotive industry is undergoing a massive shift toward electric vehicles (EVs), and strategic mergers and acquisitions (M&As) will help companies leverage this shift and drive growth. Legacy automakers and component manufacturers are constantly scouting for suitable parties to synergize their capabilities and keep pace with the evolving industry.
Surging demand for electric cars, vans, and trucks is driving investments that are overhauling the industry landscape as both Original Equipment Manufacturers (OEMs) and Technology Companies consolidate a fragmented market into a connected ecosystem that secures their future pipeline.
Technology start-ups are prime targets for OEMs and shared mobility giants as they seek to accelerate their capabilities and expand their businesses. In recent years, M&A numbers have risen considerably, and this trend is likely to witness strong growth due to the immense industry potential. OEMs expect to invest more than half a trillion dollars in EVs and batteries until 2030.
Major Issues reeling EV Charging Industry
A complicated market landscape has been the auto industry's norm where major challenges been faced by the EV Charging industry include:
Poor charging infrastructure
Vehicle-grid interoperability
Payment method integration
Power issues while charging
Finding a balance between rapid charge points and on-street units
Charging station to network
Ease of use while charging
Also, on the manufacturers’ side, since the beginning of 2020, manufacturing has been hampered majorly due to the following reasons:
Plant Shutdowns
Social Distancing Regulations
Skyrocketing Commodities Prices
Supply Chain Delays
Shortages of Everything from Microprocessors to Employees
Adding to the situation are unpredictable changes in consumer demand, inflation worries, and difficult-to-comprehend valuations such as Tesla's eye-popping trillion-dollar market capitalization. Exacerbating the confusion, the industry finds itself amid a sea change caused by a rapid transition to increasingly connected, autonomous, and electrified vehicles.
How M&A helps in Dealing with these Issues
Historically, the automotive sector has witnessed some of the biggest M&As, including the $52 billion merger between Peugeot and Fiat Chrysler, the $2.3 billion Nissan and Mitsubishi deal, and the $10.4 billion merger of Fiat and Chrysler. These acquisitions have helped companies grow more prominent and capture a significant market share.
The automobile business has seen a substantial increase in mergers and acquisitions throughout the years, a trend that has undoubtedly been affected by technical innovation. As a result of changing political, monetary, and regulatory concerns, M&A is a crucial strategy to survive and prosper in a competitive global economy.
While looking for acquisitions, CEOs of well-established firms always prefer to look for a start-up with a strong IP and tech, which the respective firm can build on top of.
Mergers & Acquisitions help bring down the cost of capital and increase cash flows, hence bringing profits.
Participants in the automotive industry aim to prepare for the future through strategic partnerships and targeted mergers and acquisitions. Some people turn to competitors to find opportunities to fill gaps in their technology portfolio. Others are reaping the fertile landscape of a global innovation Center like Israel, identifying start-ups to bring meaningful change to the organization.
Present Trends in M&A
M&A deal activity generally has accelerated at a blistering pace in the automotive and mobility sectors. Recently in July 2022, the largest announced EV SPAC deal in 2022 is Chijet Motor Co. Inc.'s proposal to acquire Deep Medicine Acquisition Corp. in a reverse merger valued at $2.26 billion. Chijet expects to yield approximately $127.8 million in cash to support EV manufacturing in China.
As 2021 drew to close, global M&A volumes were pushed toward an unprecedented record of $4.33 trillion, overtaking an all-time annual peak of $4.1 trillion before the financial crisis hit in 2007.
Global mergers and acquisitions hit historical highs in the automotive space in 2021, with a total deal value of $136.6 billion — up 111% from 2020. While the onset of the pandemic significantly impacted deal value and volume in 2020, M&A activity recovered in the second half of the year. It accelerated with deal volume in 2021 up 19%, to 971 deals, with an average disclosed deal size of approximately $435 million. Vehicle manufacturers comprised the largest segment of the $136.6 billion deal value, with $61.3 billion (or 45%).
M&A transactions are creating connected value chains that use data insight and innovation to increase the accessibility and infrastructure surrounding electric vehicles, enabling fleet operators to understand more about their vehicles and build their customer reputation through sustainable technology.
Key M&A Deals
Mergers:
Climate Change Crises (CLII) To Merge With EVgo– On January 22, fast-charging network EVgo announced it would become a publicly-traded company through a merger with the Climate Change Crises SPAC.
Proterra To Merge With ArcLight Clean Transition Corp., (ACTC) SPAC– On January 21, Burlingame, CA electric bus maker is going public through a SPAC merger with ArcLight Clean Transition Corp., and the transaction is expected to raise $825 million in cash and with an enterprise value of $1.6 billion.
Faraday Future to Merge with Property Solutions Acquisition (PSA)– This deal in 2021 combines a real estate-targeted SPAC and the struggling luxury EV maker Faraday Future. Property Solutions brings about $230 million in cash; a PIPE (private investment in public equity) funded by outside investors adds another $775 million.
FREYR, Battery Cells Developer FREYR, to Merge With SPAC, Alussa Energy Acquisition Corp.– FREYR, a Norway-based developer of battery cell production capacity in 2021, is becoming a publicly listed company through a business combination with Alussa Energy Acquisition Corp. (Source: press release)
Acquisitions:
In 2022, other M&As like Blink Charging bought the infrastructure outfit SemaConnect; Schneider Electric bought EV Connect; ABB acquired a controlling interest in InCharge Energy; and the supply juggernaut BorgWarner acquired Rhombus Energy Solutions. Meanwhile, Beam Global, Charge Enterprises, and others have emphasized M&A as their long-term strategy for success.
Shell to Acquire Ubitricity, UK Charging Network – Royal Dutch Shell announced in 2021 that it is acquiring Ubitricity, the owner of the UK’s largest public on-street electric vehicle charging network, for an undisclosed amount. The deal for the company with over 2,700 on-street charge points in the country is expected to be completed late this year. These acquisitions by such big market players are also helping build a strategic patent portfolio aligned with their business strategy.
ChargePoint’s acquisition of ViriCiti in 2021, a provider of electrification solutions for eBus and commercial fleets, for $88 million, and EVgo’s acquisition of PlugShare, an e-mobility software company, for $25 million.
Author
Somesh Singh
Associate Consultant at Lumenci
Somesh has experience in working with growing technologies in the fields of cryptography, security, and blockchain, where the technology ranges from Encryption Algorithms, and Quantum Key Distribution. He also has expertise in technologies related to Augmented Reality, Virtual Reality and Mixed Reality among others. He is a Computer Science engineer from UPTU with an LLB from Delhi University and a PGD from NLSIU Bangalore, India.