As Automotive M & A Picks Up Speed, Private Equity Investors Need To Be Smarter; CSM Worldwide Cites Criteria For Picking Winners

DETROIT, Nov. 17, 2003 -- While the 1990s spending frenzy that drove rampant automotive supplier consolidation has waned, the current market offers opportunities for smart mergers and acquisitions (M & A) in a tight credit environment, according to Jim Gillette, CSM Worldwide director of supplier analysis and co-leader of the newly launched CSM Financial Services Group.

Playing a key role in the reemergence of automotive M & A activity will be private equity investors. These groups have become increasingly important as sources of capital as publicly traded equity has either been too expensive or otherwise unavailable, and traditional sources of debt financing have dried up.

"The automotive supplier industry is a highly competitive market. Winners and losers are sometimes very difficult to identify," said Gillette. "The trick, when considering investment opportunities, is to identify the characteristics of a winning organization."

According to Gillette, the automotive supplier marketplace again offers M & A opportunities, but a new, more sophisticated approach to supplier evaluation is required to identify attractive companies. The approach requires an extensive risk-based analysis that evaluates a supplier on a number of factors, including:

  -- Customer mix: who are they and what are their production dynamics?
  -- Vehicle program mix: what vehicles are long-term winners and losers?
  -- Geographic mix: does future business leverage global market
     opportunities?
  -- Technology/Market timing: is technology driving or trailing market
     shifts?
  -- Booked-business volatility: is future volume inflated or realistic?

CSM Worldwide supports more than 350 automotive suppliers with global market intelligence and forecasting services. With corporate offices in Detroit, CSM Worldwide covers the global automotive environment from London, Brussels, Frankfurt, Budapest, Sao Paulo, Tokyo, Beijing, Shanghai and New Delhi.