Special report: Auto industry, technology, private equity drove Michigan's mergers and acquisitions in 2017 - Crain's Detroit Business

"Multiples are really high right now, and that's driven a lot of sellers into the marketplace that normally wouldn't have been interested," said Timothy Damschroder, partner and chair of the business practice for Bodman LLP in Ann Arbor. "People are bullish on the economy, from Wall Street to the middle market, and that's driven everyone to be aggressive."

For American Axle, the push to acquire Metaldyne Performance Group — formed in 2014 when its private equity owners American Securities merged the former Metaldyne with Grede Holdings LLC and HHI Group Holdings LLC — was a necessity to reduce its reliance on its former parent company General Motors Co.

The automaker accounts for more than 60 percent of American Axle's revenue and poses a threat to its bottom line if the automaker's sales fall off. The integration of MPG is expected to reduce GM to 41 percent of sales this year with plans to reduce that further to 32 percent by 2020.

David Dauch chairman and CEO, in an interview with Crain's in April last year, said he spoke with Steve Keifer, GM's chief of purchasing, after the deal was signed and the automaker is very supportive of the deal.

"Keifer recognizes the intent to reduce our reliance on GM, but while protecting our business with them," Dauch said.

Plymouth Township-based Adient Ltd. sought to improve its capacity use and expand market share with its $360 million acquisition of competitor Futuris Group in September. Lear did the same thing in April when it acquired the seating business of Grupo Antolin for $307 million.

Strategic buyers weren't alone in amassing market share last year either. Boston-based private equity firm Thomas H. Lee Partners acquired Warren's Art Van Furniture Co. in a $550 million deal in February, then used the furniture retailer to acquire Levin Furniture Inc. and Wolf Furniture Co., both of Pennsylvania, for $170 million and $95 million, respectively. Experts believe Thomas H. Lee plans to roll out the Art Van brand to a wider geographic market in a fragmented industry ripe for such consolidation.

Private equity is expected to remain strong in 2018 as well, Damschroder said, because firms continue to be very successful in raising funds thanks to a years-long trend in economic growth.

Globally, private equity funds are sitting on nearly $1 trillion of "dry powder," industry slang for money that they've raised but have yet to invest.

"People want to invest dollars in business, and the amount of dry powder is just massive," Damschroder said. "PE firms have so much to invest they are essentially fighting each other to get deals done."

The auto industry's breakneck pace of new launches — some suppliers expect to be involved in as many as 200 new product launches in the next two years — is expected to cause financial distress among the supply base, providing lower prices and more opportunity for private equity takeovers, said Leonard LaRocca, partner of the deal advisory practice for KPMG LLP in Detroit.

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