Global M&A market sees first positive performance in three years, although too early to call signs of green shoots

LONDON, 8 October 2020 — The global M&A market recorded its first positive performance in three years for completed deals, despite the impact of the COVID-19 pandemic on dealmaking during 2020, reveals new M&A data from Willis Towers Watson.

Based on share price performance, the latest results from Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM), run in partnership with the M&A Research Centre at The Business School (formerly Cass), show that buyers outperformed the MSCI World Index¹ in the third quarter of 2020, with a performance of +1.5pp (percentage points) above the Index. This is the first positive performance by acquirers since the third quarter of 2017 (+0.7pp).

However, deal volumes are at their lowest level for over a decade (since Q3 2009), with just 121 deals completed in the last three months. The ongoing economic impact and uncertainty caused by the pandemic have continued to depress deal completions globally.

Jana Mercereau, Head of Corporate M&A Consulting, Great Britain at Willis Towers Watson, said: “It is too early to interpret the flurry of announced deals in recent months as a sign that M&A is on the rebound. Our research on completed deals and their performance provokes a more cautious response. With the volume of completed deals at its lowest in a decade, performance of North American deals at rock bottom, fuelled by enduring pandemic, economic and political uncertainty, buyers need to be both bold and careful.”

Key findings from the QDPM data include:

• European acquirers resilient – Buyers in Europe are currently +20.4pp above their regional index with 30 deals closing in Q3. This is the first time in two years that Europe has recorded four consecutive quarters of positive performance.
• North American M&A performance at rock bottom –  Deal makers in North America had their worst quarterly performance since the QDPM Index launched in 2008. They significantly underperformed their regional index by -8.6pp, with 52 deals completed in Q3 2020, and completed the joint lowest number of deals since 2009 (on par with Q2 2020).
• Asia-Pacific maintains positive trend – The region continues the positive performance recorded in H1 2020 by outperforming its index with a performance of +4.4pp, with 35 deals closed in Q3 2020. For the first time since 2017, Asia Pacific acquirers have achieved two consecutive quarters of outperformance.

“COVID-19 was a massive shock hitting economies and stock markets globally, yet instead of collapsing, M&A deals continue to defy gravity,” said Jana Mercereau. “Compared with previous economic cycles, the amount and diversity of capital available for M&A is extraordinary, assisted by historically low interest rates. Buyers who act decisively and with robust due diligence to exploit opportunities during this period of uncertainty could see higher returns than their industry peers and drive long-term growth.”

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 average of the closing price of the final trading days of the quarter. Averaging share prices for the last five days of the quarter was a measure designed specifically for Q1 2020, in order to ensure a more accurate assessment of share price performance at a time of intense market volatility.
• 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 Refinitiv.

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 45,000 employees serving in more than 140 countries and markets. 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.

Footnote

¹ The M&A research tracks the number of completed deals over $100m and the share price performance of the acquiring company against the MSCI World Index, which is used as default, unless stated otherwise.