Capstone Partners, a leading middle market investment banking firm, has released its February 2022 Vehicle Aftermarket Report, discussing the sector’s performance throughout COVID-19. At the onset of the pandemic, companies in Enthusiast and Do-It-Yourself (DIY) categories benefited from elevated demand, while service providers and part manufacturers serving Do-It-For-Me (DIFM) markets experienced a brief drop in demand due to government-imposed shop closures. However, Capstone says the sector is poised to benefit from positive trends in macroeconomic drivers, including the rising number of registered vehicles, the increasing average age of automobiles and light trucks, and the resurgence in miles traveled.
In addition, pent-up demand, elevated e-commerce use, rising interest in DIY projects, and growth in the Enthusiast category have created opportunities for aftermarket companies, according to Capstone’s research. While supply chain disruptions, raw material prices and labor market shortages are expected to continue to challenge aftermarket companies in the near term, difficulties regarding sourcing parts overseas are projected to wane in the second half of 2022 as supply chains normalize.
Recognizing the resilience and growth potential of the sector, buyers have demonstrated significant interest in the space, with merger and acquisition (M&A) activity moving at a fervent pace throughout 2021. Given its fragmentation across subsectors, the Vehicle Aftermarket presents a lucrative consolidation opportunity with acquirers seeking businesses in attractive geographies that serve high-growth end markets or offer complementary products or services.
Financial buyers comprised the majority of deal activity in 2021, led by private equity (PE) add-ons. PE-backed companies have leveraged private equity funding to pursue roll-up opportunities to increase scale. This is very prevalent across the Aftermarket Service sector including general repair, collision, car wash, and oil & lube.
“The aftermarket witnessed heightened M&A activity across virtually all subsectors in 2021. We expect this level to sustain through 2022 as aftermarket fundamentals remain strong and strategic and financial buyers continue to put capital to work through acquisitions,” said Capstone Partners Senior Director Yogesh Punjabi, lead contributor in the newly released report.
Also included in this report:
- A breakdown of the key macroeconomic drivers that determine sector demand
- An overview of meaningful trends impacting the sector
- EBITDA trading multiples and valuation drivers for aftermarket companies
- Summaries of recent notable M&A transactions
To access the full report, click here.
