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Buoyant M&A market continues despite economic instability

Reports of global merger and acquisition (M&A) activity entering a dry spell appear premature with dealmakers recording the third highest number of completed deals in an opening six months since M&A deal research by WTW began in 2008.

According to analysis based on WTW’s Quarterly Deal Performance Monitor (QDPM), the only years that have surpassed the 441 deals (valued over $100 million) completed in the first half of 2022 were 2021, during an exceptional pandemic rebound, and 2015.

Although deal activity has slowed from its record-setting 2021 pace, when 484 deals were completed in the first six months, M&A volumes remain buoyant this year with the number of transactions continuing to exceed pre-pandemic levels, according to the QDPM data, run in partnership with the M&A Research Centre at Bayes Business School. 

Deal performance, in contrast, has struggled to defy gravity and has clearly been impacted by market volatility. Amid soaring inflation, rising interest rates, geopolitical tensions and the ongoing Covid-19 pandemic, buyers underperformed the wider market[2] by -4.8pp, based on share price performance, during the first six months of 2022.

The average time to close a deal has also increased in 2022, with 60% of transactions during the first six months taking over 70 days (the long-term average time between announcement and closing), compared to 54% in the first half of 2021. In contrast to last year when competition for assets was fierce and buy-side deal teams had to work with compressed diligence periods to stay competitive in the bid process, market volatility in 2022 has raised the stakes for buyers, advocating caution and increasing due diligence.

The number of megadeals (valued over $10 billion) was up to 12 in the first half of 2022 compared to 10 in the same period last year, signalling that companies have not been put off from completing the larger deals planned and announced during the post-pandemic boom, despite the broader market turmoil of the first half of 2022.

All regional acquirers, except those in Asia-Pacific (APAC), underperformed in H1 2022. APAC acquirers outperformed their regional index, showing an overall performance of +7.2pp with 96 deals closed. Meanwhile, North American acquirers underperformed their index by -6.1pp with 220 deals completed in the first six months of 2022, and dealmakers from Europe underperformed their index by -5.9pp with 102 deals in the same period. 

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