Steady M&A Activity on the Retail Front Leads Tire Industry Through Q3

The Merger & Acquisition Environment

The third quarter saw a slowdown of M&A activity in the industry after a fairly active first half of 2018. This was consistent with a decline in general M&A volume in North America for the period. While the macro environment remains robust, interest rates have been ticking upward at a healthy clip and possibly creating a slight drag on activity during this period of normalization.

Wholesale M&A activity was notably absent, not likely a surprise to industry insiders as the segment continues to evolve structurally given recent upheavals. We expect retail to remain active and commercial/manufacturing to be steady going into year-end. 

Key Takeaways:

  • Steady acquisition activity on the retail front, with players like Monro positioning to capitalize on an e-commerce / brick and mortar integration trend
  • Consolidation moves continued by manufacturers and commercial service providers
  • M&A activity occurred both domestically and internationally, with a majority of transactions completed by strategic buyers

Historical M&A Trends by Period/Sector

Total Transaction Count

Historical M&A Trends by Period

Note: For the three-month period from July 1 to September 30 for each of the years listed above.

Transactions per Sector

Historical M&A Trends by Sector

Note: For the three-month period from July 1 to September 30 for each of the years listed above.

Retail

Retail M&A Transactions - Q3 2018

Retail MA Transactions Q3 2018

Monro, Inc.

In July 2018, Monro, Inc. completed two acquisitions: Sawyer Tire Co. of Missouri, and Mayfair Tire & Service Center Inc. of Pennsylvania. These acquisitions come on the heels of yet another acquisitive quarter in the second quarter, where the retailer acquired 16 retail stores, four wholesale distribution centers, and one retread plant. The Sawyer locations, as well as a number of outlets acquired over the past fiscal year, will be rebadged under the Car-X Tire & Auto brand, bringing that network to 150-plus locations.

Monro announced in July that it has partnered with Amazon to provide tire installation services at Monro’s retail tire and automotive service centers. While initially limited to Monro’s 52 stores in the greater Baltimore area, the collaboration is expected to expand across Monro’s 1,170-plus retail locations across 27 states. Monro’s partnership with Amazon signals a growing need for tire e-tailing capabilities, and demonstrates the potential value of e-commerce/brick and mortar integration from a customer service perspective.

Continental AG

Continental AG has agreed to acquire Kmart Tyre and Auto, an Australian retail business with 258 locations and over 1,200 employees, from Wesfarmers. Management believes that Continental’s automotive industry expertise and offerings are highly complementary with Kmart Tyre and Auto. The transaction will greatly enhance Continental’s distribution and service network in the Australian market.

Bridgestone Europe

Bridgestone announced its acquisition of United Kingdom-based ETB Exhaust, Tires & Batteries in September 2018. ETB is a leading automotive services provider in the United Kingdom, running 32 locations and operating with more than 250 employees. As noted by management, Bridgestone’s rationale for the transaction centers around an increased focus on retail expansion throughout Europe, with acquisitions over the past four years across France, Germany, Spain, and Slovakia.

Wholesale

Wholesale M&A Transactions - Q3 2018

Wholesale MA Transactions Q3 2018

Hankook Tire Co. Ltd.

Seoul, South Korea-based Hankook Tire Co. Ltd. announced its acquisition of Reifen-Mueller, a Hammelburg-Westheim, Germany-based wholesale and retail tire distributor, in July 2018. Founded in 1966, Reifen-Mueller operates 44 locations, including a 430,000-square-foot distribution center in central Germany. Management noted that the deal, which includes Reifen-Mueller’s retreading business, allows Hankook to significantly expand its distribution capabilities throughout Europe.

Commercial/OTR

Commercial/OTR M&A Transactions - Q3 2018

Commercial OTR MA Transactions Q3 2018

Dickinson Fleet Services

In August 2018, Dickinson Fleet Services announced the acquisition of Truck PM Plus from Bridgestone Americas. Headquartered in Florida and operating with seven total locations, Truck PM Plus provides truck and trailer maintenance services, including mobile services, shop services, and dedicated on-site services. This acquisition by Dickinson represents its third transaction completed within the last six months, and the fourth acquisition completed under the ownership of Ridgemont Equity Partners. The Truck PM Plus acquisition further expands Dickinson’s service offerings and geographic reach, while simultaneously adding scale to operations.

Trelleborg A.B.

Trelleborg A.B. announced in July its acquisition of New Zealand-based TRS Tyre & Wheel Ltd. Founded in 1977, TRS is regarded as New Zealand’s largest importer and distributor of agricultural and industrial tires and wheels. Management cited both an expanded global reach, with an added local presence in New Zealand, and product enhancement, with a focus on tire sales for agricultural, material-handling, and construction vehicles, as the two primary drivers underlying the acquisition.

Manufacturing

Manufacturing M&A Transactions - Q3 2018

Manufacturing MA Transactions Q3 2018

Michelin

In a deal valued at approximately $1.45 billion, Michelin announced its acquisition of Quebec-based Camso, Inc., in July 2018. The acquisition will ultimately combine the OTR operations of the two companies, forming a new division that will be managed from Quebec. The combined entity will become the world’s number one OTR market player, and will benefit from the expertise of Camso’s management team, as well as Michelin’s long-standing presence in Canada. The new entity will more than double the net sales of Camso, and will be supported by 26 plants and approximately 12,000 employees. Michelin expects synergies of up to $55 million to be realized by 2021.

Sources for all charts: CapIQ and Stout Research

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