As we move into a new decade, global dealmaking is likely to experience a continued hangover in 2020, with protectionism, a US presidential election and financial market volatility acting as a brake on M&A activity,” Jana Mercereau, Head of Corporate Mergers and Acquisitions for Great Britain at Willis Towers Watson.
Europe is the only region worldwide to have recorded positive M&A performance in 2019, with European dealmakers marginally outperforming their regional index by +0.6pp (percentage points) over the last 12 months, according to the latest results from Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM), run in partnership with Cass Business School1.
North American and Asia-Pacific acquirers continue to struggle to unlock value from their deals, underperforming their regional indices during 2019 by -5.6pp and -3.2pp respectively.
The number of deals so far completed worldwide in 2019 is 699, significantly down compared to 2018 (904) and the market is on course to seeing the lowest annual volume since 2010 (688)2 . Sixty per cent of these deals have failed to add shareholder value in 2019.
Jana Mercereau, Head of Corporate Mergers and Acquisitions for Great Britain, said: “As we reach the end of the decade, 2019 shows a sharp decline in global deal volume, potentially the slowest pace in M&A activity since 2011, with the market having become a more nervous place and dealmakers having had to confront increasingly complex governance issues to complete transactions.”
Europe’s positive result was achieved despite continued poor performance from UK buyers (-3.7pp). During the same period, acquirers from North America underperformed their regional index by -7.1pp, and Asia-Pacific acquirers failed to replicate their outperformance in the third quarter and showed an underperformance of -1.0pp.
“European acquirers have not only outperformed their counterparts in North America and Asia-Pacific for the last two years, but also completed the fewest deals of any region in this period. This trend points to the benefits of a more disciplined market with corporations focusing on core competencies and prioritising strategic deals,” said Jana Mercereau.
Based on share-price performance, acquirers worldwide have now on average failed to add value for nine consecutive quarters, underperforming the Global Index by -4.8pp over the past year, and -5.5pp (percentage points) in the last three months, for deals valued over $100 million. Based on share price performance, additional findings revealed by the study include:
”As we move into a new decade, global dealmaking is likely to experience a continued hangover in 2020, with protectionism, a US presidential election and financial market volatility acting as a brake on M&A activity,” said Jana Mercereau. “A drop in available deals, however, is likely to force buyers - armed with record levels of capital and access to debt – to be more selective and by applying a clear-cut strategic rationale and thorough due diligence many will succeed in bucking the global negative trend to execute quality deals that add real value.
“The recent election results in Britain have already had an immediate positive impact on the British currency. We may now see a resurgence of activity both from and in Britain given the decreased level of uncertainty,” added Jana Mercereau.
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