May 25, 2022

AutoTech & Transportation Software Market Update: Sector M&A Volume Reaches Record Levels

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Autotech SectorAutoTech M&A Activity Hits Record Highs As Strategic Investors Search For Growth

Capstone Partners released its May 2022 Automotive Technology (AutoTech) & Transportation Software Market Update, reporting that merger and acquisition (M&A) activity in the AutoTech & Transportation Software sector set an annual record in 2021, with 512 transactions announced or completed. Deal flow has continued at a torrid pace through Q1 2022, with 512 transactions announced or completed in the last twelve months, outpacing the 2018-2020 annual average of ~ 350 deals. Led by an extensive strategic buyer pool, M&A activity is slated to continue through 2022, albeit at a more normalized rate. Revenue multiples paid for M&A targets in the AutoTech & Transportation Software space increased considerably in 2020 and 2021 over prior years, mirroring the increase in deal activity. This increase in purchase multiples is consistent with the broader Software market, driven by strategic acquirers searching for growth, an influx of private equity capital targeting software companies, a large backlog of deals due to the pandemic, and fears of capital gains tax increases. However, there does appear to be a slight softening in M&A valuations in the latest twelve months, which may be indicative of the correction in the public markets.

Valuations of public companies in the AutoTech & Transportation Software sector tend to vary broadly based on differences in growth rates, business models, margin profiles, and competitive positioning. Revenue trading multiples for public companies in the Autonomous Navigation & Connected Car subsegment are on the high end of the range, primarily due to high expected growth rates. Revenue trading multiples are also on the higher end of the range for the Transportation Software and Supply Chain Management (SCM) & Warehouse Management System (WMS) Software subsegments as these companies tend to have both double-digit expected growth rates and very attractive margin profiles. Conversely, public companies in the Fleet Management/Telematics subsegment typically trade at lower revenue multiples as their business models often include a hardware component which results in more modest margin profiles and growth rates.

Also included in this report:

  • A breakdown of historical M&A activity by segment and buyer type
  • Analysis of M&A purchase multiples over the past four years
  • How private equity firms have leveraged record levels of dry powder to pursue add-on acquisitions
  • Key market statistics on the Dealer, Listings, & Aftermarket segment including projected growth rates, M&A volume, valuations, and active buyers
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