Will M&A Frenzy Hit The Auto Industry?

Mergers and acquisitions are the norm for startups and established players in Silicon Valley. They've also become quite common in the retail and healthcare spaces.

The auto industry is a whole other story. Carmakers rarely announce that they are buying a startup.

Ford Motor Company F, which acquired Livio in 2013, is still open to the idea of additional M&As. Joe Hinrichs, Ford's EVP and president of the Americas, indicated that partnerships might be more likely than full acquisitions, however.

What about the rest of the industry? During the 2015 Automotive News World Congress, Bank of America Merrill Lynch analyst John Murphy said that M&As are on the rise. He believes the auto industry will get larger with fewer players.

Related Link: Google's Driverless Cars Have An Unexpected Enemy: Snow

Sachin Lulla, a partner in International Business Machines Corp.'s IBM North American automotive practice, doesn't think that will be the case. He said that M&A activity would "take away from an OEM's focus to develop the best product, provide the best experience [and] market and service their products."

"It would really take away from that core focus," Lulla told Benzinga. "Partnerships [will] be more common than acquisitions. Although there may be some acquisitions if there is a very unique play that will be a huge comparative differentiator for any OEM in the industry."

Over the next five to 10 years, Lulla expects innovation to mostly come from partnerships inside and outside of the industry. He said that will be a "game changer."

"There will be a lot of unique partnerships," Lulla added, noting the agreement between Tesla Motors Inc TSLA and Panasonic Corporation (ADR) PCRFY.

Investors might see some M&A action from a related industry, however.

"The OEMs in the heavy equipment industry are a lot more aggressive and open to watching, monitoring and following new startups [and] private equity funds that are coming up with new solutions, new technologies, new capabilities that they could partner with or acquire," Lulla concluded. "Compared to automotive, I believe heavy equipment may see more M&A activity just given the dynamics in that industry."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.