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

Despite announced M&A deals coming back with a bang in the third quarter as boards went on a pandemic deal spree, new data on completed deals demands some caution...

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).

“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.”

Jana Mercereau,
Head of Corporate M&A Consulting, Great Britain at Willis Towers Watson

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.”