Samsung accelerates into car market with $8bn HARMAN buy

Contact:Scott Denne

Samsung makes its largest tech acquisition on record with the purchase of Harman International Industries (HARMAN). Samsung made the $8bn gambit to jumpstart its push into the automotive market as that industry is poised to transform around advances in sensor technology, connectivity and artificial intelligence.

Ever the cautious buyer, Samsung hadn’t paid more than $350m for any tech acquisition in at least 14 years, according to 451 Research’s M&A KnowledgeBase, although it has picked up the pace of dealmaking recently. HARMAN marks the fifth transaction of the year for the Korean electronics conglomerate, making 2016 its most active year ever.

In picking up HARMAN, Samsung obtains a company that generated 65% of its $7bn in trailing revenue from sales to the automotive industry, a market where Samsung has little experience. HARMAN’s roots are in audio equipment and that business still accounts for one-third of its revenue. However, a plurality of its sales today – 44% – comes from its connected car segment, which was cobbled together through several purchases over the past four years with a particular emphasis on providing software capabilities for connected cars.

According to our surveys, more than one-third of consumers are interested in having wireless connectivity built into their cars to enable applications such as richer dashboards, music streaming and emergency services. That burgeoning demand has manifested itself in recent M&A activity.

Acquisitions of software, systems and component companies with a substantial play in the automotive vertical made a massive jump last year, driven by a combination of car-related chip deals, as well as pickups of GPS, mapping and other software vendors that cater to the sector. Although down from last year’s record amount, the $10.7bn of such transactions this year is well above the norm.

J.P. Morgan Securities and Lazard Freres & Co advised HARMAN on its sale. Evercore Partners banked Samsung.

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Posted in M&A