December 3, 2024 EV Sector Faces Challenges Despite Positive M&A Outlook

Mergers and acquisitions promote growth and diversification, but M&A in the electric vehicle sector may be more challenging going forward.

By Mark Williams, Americas Chief Revenue Officer at Datasite

Deregulation Could Fuel Activity

In the US, a new administration is expected to pursue a business-friendly agenda that will likely include a more accommodating regulatory environment. That means M&A activity overall may increase, while transaction timelines drop back down to more typical six-to-nine-month deal cycles from the lengthier timelines that have emerged this year.  

Before the election, new sale kickoffs on Datasite, which annually facilitates close to 15,000 new global deals at inception, rather than announced, were up 10% for the first 10 months of this year, compared to the same time in 2023. Yet, in the two weeks since the US Presidential election concluded, global deals on Datasite have surged 22% compared to the same two weeks a year ago, driven by healthcare and TMT. Both sectors are predicted to benefit from U.S. post-election policy shifts favoring innovation and investment. Industrial deals also rose 11%.

 Many deals are also re-launching after being put on hold earlier this year, partly to wait out the US election and partly due to resourcing and bandwidth constraints from heavy deal flow in the spring. Additionally, private equity (PE) logins on Datasite jumped 22% in the first week after the election, to reach the highest weekly PE registration rate this year. Additionally,  a surge of deal kickoffs on Datasite from April and May have been moving through the deal pipeline and is due to close in the next few months. Dealmakers must balance closing as many transactions as possible before the end of the year with kicking off new ones.

Despite slowing growth in the last year, demand for EVs are expected to increase, with forecasts estimating 85 million cars, buses, vans and heavy trucks to be on the road by the end of 2025, while passenger EV sales are forecast to rise to $14 million in 2025 from $3 million in 2020.

Elimination of Tax Credits Could Slow EV Sales, Production

Still, investment and M&A in EVs may become more challenging, especially as policies, including a $7,500 tax credit, are expected to be eliminated by the incoming administration, potentially making the cost of EVs more expensive. Part of the US Inflation Reduction Act, the tax credit was established to promote US production of EVs. The elimination of this tax credit, among other changes, could cause US automakers to decrease EV production and sales.

Additionally, while the industry continues to be committed to an electric future, several companies are adjusting their plans.

At the same time, Europe and Asia are expected to continue investment into EVs, which may mean EV makers will pursue a variety of deals, to fill technology or capacity gaps creating vertical and horizontal opportunities.

By acquiring suppliers, distributors, materials producers, or even logistics companies, EV makers can potentially lock in key resources, better control strategy, and improve overall efficiency. For example, one EV maker recently announced plans to purchase one of its distributors, while another EV maker plans to acquire a battery maker to better control costs and quality, which is crucial for enhancing the durability and performance of its EV components.

Changes in tariff policies, which have been promised under the new administration, may also make US targets more attractive. Global organizations may want to have US operations in place to avoid potential increases. With interest in nearshoring continuing to gain traction in response to labor costs and geopolitical tensions, some EV makers have already reevaluated their supply chains to localize key processes.

Whatever the case, efficient and effective planning will be key to successful investing and dealmaking. Here, technology can help. Technological tools, including advanced technologies such as artificial intelligence (AI) and generative AI, can streamline and mitigate the risks in M&A processes. For example, AI-powered tools included in virtual data rooms (VDRs) can automate manual and time-consuming tasks, such as organizing and categorizing files needed for review by potential investors or purchasers, while simultaneously reducing human error and ensuring better regulatory compliance.

It remains unclear exactly where the global EV market is headed, but for those who do plan to invest, purpose-built M&A technology can help mitigate risks and maximize value to ensure successful M&A.

About the Author:
Mark Williams is Chief Revenue Officer for the Americas (AMERS) at Datasite, a leading SaaS platform used by enterprises globally to execute complex, strategic projects.

In his role, Mark is responsible for setting and executing the sales strategy across the region, including leading over 170 sales representatives, sales leaders and pre-sales teams across the United States, Canada, and Latin America.

Prior to joining Datasite in 2015, Mark held several sales leadership roles at a variety of SaaS companies, including SmartFocus and Kno.

Mark holds a BSc in Mechanical Engineering from Humberside University, England.

Find Mark on LinkedIn.

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