North American companies making M&A deals, on average, lost shareholder value during the second quarter of 2019, underperforming the MCSI North America Regional Index by –3.7 percentage points (pp). Further, for the first time in over a decade companies making M&A deals in every region worldwide, on average, lost shareholder value, underperforming the World Index1 by –6.3 pp. According to the latest results from Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM) — run in partnership with Cass Business School — the global M&A market has now underperformed for an unprecedented seven consecutive quarters.
For the first time in five years there were no completed megadeals in Q2 2019 (those valued at over $10 billion). North American deal volumes were essentially flat for the quarter, and all global geographic regions underperformed their respective indices. Asia Pacific acquirers showed the worst performance of all regions with underperformance of –7.9 pp, followed by European buyers at –4.1 pp. Europe now remains the only region where acquirers are still outperforming the index for both the one-year and three-year rolling periods.
“M&A activity is a barometer of business confidence. The rapid drop in deal volume in the last six months, especially in the U.S. market, suggests the impact of geopolitical, trade and tariff uncertainties has been brutal, fueling board room uncertainty around the world,” said Duncan Smithson, senior director, M&A, Willis Towers Watson. “Until there is less turbulence in the markets there is a good chance that even fewer deals will be announced in the second half of 2019, underscored by more stringent regulations, protectionism and political uncertainty, which continue to frustrate deal making.”
Based on share-price performance, deal volumes were at the lowest level since Q2 2009 for any second quarter, with 144 deals completed so far in Q2 2019.2 This is attributed to a flat volume of deals in North America (lowest since Q2 2009), Europe and Asia Pacific (lowest since Q2 2013).
“Corporate clarity will continue to be a key theme driving M&A activity, as pressure increases on companies to review their business structures and assess how best to unlock value from deals,” said Smithson. “Digital disruption will also be a major factor shaping the market, as large companies attempt to assimilate technology to become more efficient and better reach end users by buying boutique firms, resulting in fewer billion-dollar megadeals.”
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