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Press Release

Still derailed: No relief for M&A market as deals continue to disappoint for fourth straight quarter


September 24, 2018

The global M&A market underperformed for an unprecedented fourth consecutive quarter

LONDON, Monday 24 September 2018 — Over the past two years, acquirers have consistently failed to achieve anything close to meaningful market over-performance, with deals valued from $100 million to over $10 billion underperforming the Global Index1 by an average of 1.8pp (percentage points) during that period.

Jana Mercereau, Head of Corporate Mergers and Acquisitions for Great Britain, said:
“Confronted by looming trade wars, regulatory pressures and geopolitical events dominating the agenda in the US, Europe and the UK, all regions except for Europe underperformed their respective indices from July to September 2018. Despite these challenges, deal volumes remain high as acquirers continue to back M&A activity as a route to growth."

Based on share price performance, key findings revealed by the Willis Towers Watson global study in partnership with Cass Business School include:

  • European acquirers managed to buck the negative worldwide trend by outperforming their regional index by 2.8pp. This is despite being brought down by UK acquirers who are currently at 2.6pp below their index for this quarter.
  • In contrast to the poor record of UK acquirers, the takeover of UK firms by deal makers from outside of the country delivered positive returns for the last three quarters, most recently outperforming the regional index by 17pp in Q3 2018.
  • Acquirers in North America show an underperformance of 1.9pp in Q3 2018. Asia-Pacific companies recorded the worst performance of all regions (7.8pp), underperforming their regional index for the seventh consecutive quarter.
  • Over a three-year rolling period, European acquirers are in the top spot due to their consistent outperformance in the last six quarters (6.6pp above their regional index), followed by Asia Pacific and North American companies which have outperformed their regional indices over the same period (4.3pp  and 0.4pp respectively).
  • The three-year rolling average performance is currently positive at 1.9pp and the performance since the start of the QDPM in 2008 is at 3.1pp,

Mercereau said: “Capital markets remain resilient, European players are performing well and the long-term data shows companies active in M&A consistently outperform those that stay away from deals. In the face of this optimism and appetite, M&A deals have visibly struggled for two years to add shareholder value. With challenges on the horizon, the question is, have dealmakers learned the lessons of the financial crisis a decade ago when over optimistic and unprepared dealmakers got their fingers burnt.

“Lacklustre performance in 2018 has put deal makers under significant pressure to achieve blockbuster results in the final quarter. The trick, as always, is to do M&A right. Key to success is a rigorous and critical eye during due diligence, lock step with integration planning and a focus on people who will be instrumental to execution. These elements have always been central to the historical success of deal making as a growth strategy and are fundamental now if we are to see a rebound before the end of the year.”

Willis Towers Watson QDPM methodology

  • All analysis is conducted from the perspective of the acquirer.
  • Share-price performance within the quarterly study is measured as a percentage change in share price from six months prior to the announcement date to the end of the quarter.
  • All deals where the acquirer owned less than 50% of the shares of the target after the acquisition were removed, hence no minority purchases have been considered. All deals where the acquirer held more than 50% of target shares prior to the acquisition have been removed, hence no remaining purchases have been considered.
  • Only completed M&A deals with a value of at least $100 million which meet the study criteria are included in this research.
  • Deal data sourced from Thomson Reuters.

About Willis Towers Watson M&A

Willis Towers Watson’s M&A practice combines our expertise in risk and human capital to offer a full range of M&A services and solutions covering all stages of the M&A process. We have particular expertise in the areas of planning, due diligence, risk transfer and post transaction integration, areas that define the success of any transaction.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential.

1. MSCI World Index is used as default, unless stated otherwise.

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