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European dealmakers top global M&A rankings for second consecutive year

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 School. 

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 School. 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). 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, says: “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,” says 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 USD100 million. Based on share price performance, additional findings revealed by the study include: 

• Large deals – The annual volume year to date in 2019 is currently at 138 – the lowest annual volume since 2013. 

• China – The number of deals completed by Chinese dealmakers has dramatically declined year on year from a record high of 243 in 2015 to just 72 in 2019. This drop in Chinese-led deals is consistent with a wider trend for fewer M&A deals across Asia. 

• Domestic vs Cross-border – Domestic deals dropped significantly from 638 in 2018 to 448 in 2019. This compares to cross-border deal volumes which managed to hold up over the same period, with 266 completed in 2018 compared to 251 in 2019.

• Closing speed – M&A transactions are taking longer to close, with deals completed so far in 2019 taking on average 141 days to execute compared to 120 days in 2018.

• Long-term winners – Based on share price performance, companies engaged with M&A deals have outperformed the market by an average of +2.4pp since 2008. 

”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,” says 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.”

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