Report: Fragmentation & Demand Boost Automotive Aftermarket M&A Outlook 

Capstone Partners, a middle-market investment banking firm, released its May 2025 “Automotive Aftermarket Sector Update,” reporting that several secular trends have bolstered sector growth and merger and acquisition (M&A) activity.

According to the report, long-term demand drivers, including an expanding and aging car parc and a rise in total miles traveled, have spurred heightened spending on automotive aftermarket parts and services. Additionally, prolonged inflation, elevated new vehicle prices and high borrowing costs have forced consumers to delay new car purchases (apart from a recent temporary surge), supporting maintenance and repair services spending on older vehicles.

In 2024, the average age of all light vehicles on the road ticked higher to 12.7 years, while passenger vehicle age grew to 13.7 years, according to Hedges & Company. The total 12-month moving average miles traveled grew to 3.3 trillion as of December 2024, a 1% increase compared to the prior year, according to the St. Louis Federal Reserve. Aging vehicles require frequent maintenance and repairs as components deteriorate with increased mileage, providing aftermarket replacement part suppliers and service providers with a growing revenue pipeline.

Impact of Tariffs

In the near term, tariff headwinds have headlined economic discussions to start 2025. However, companies that successfully navigate the new regime will likely capitalize on tariff-induced demand tailwinds for aftermarket parts and services. Already elevated new and used vehicle prices are expected to move higher and continue providing the aftermarket with an increased demand for replacement parts and services as consumers choose to maintain existing vehicles rather than acquire new ones. Moreover, margin accretive opportunities in the M&A market are projected to see significant interest as maintaining margin performance will be challenged under new tariffs. Sector participants may also pursue vertical integration of the supply chain more aggressively, contributing to additional M&A in 2025.

Automotive aftermarket M&A has accelerated through early March 2025, rising 30.8% year-over-year (YOY) to 51 transactions from 39 in year-to-date (YTD) 2024. Dealmaking figures have shown considerable strength despite persistent inflation and tightness in the consumer wallet over the past two years, with transaction volume tracking peak levels in 2021 and 2022.

M&A Activity Expected to Continue to Rise

Capital has become more accessible, and compression of bid-ask spreads has alleviated some pressure on transaction activity. Overall, automotive aftermarket M&A activity has remained elevated from pre-pandemic volumes and seen a substantial YOY increase, with volume expected to further accelerate in the coming quarters as any additional rate cuts will likely relieve some burden on consumer credit and encourage businesses to expand operations.

Tangentially, investors have expressed continued interest in the services segment, particularly in the non-discretionary side of the aftermarket. While non-discretionary parts suppliers and service providers have remained relative hot spots for M&A, acquisition appetite in the discretionary parts & services segment has been tepid. The M&A market for discretionary parts and services providers will likely begin to open as consumer sentiment improves and interest rates once again start to decline.

“Deal activity in 2024 remained strong for non-discretionary services (general repair, collision, quick lube, glass) and replacement part suppliers and distributors, given their proven recession-resistance and potential for strong growth through consolidation,” said Capstone managing director Yogesh Punjabi, the lead contributor in the newly released report. “Buyers placed a premium on high-quality assets with strong brands and defensible footprints. We expect M&A across these segments to continue growing in 2025.”

You can find the full May 2025 “Automotive Aftermarket Sector Update” report here.