While global M&A performance is the worst in 10 years
ARLINGTON, Va., June 25, 2018 (GLOBE NEWSWIRE) -- During the second quarter of 2018, the North American M&A market recorded its worst-ever performance since the launch of the Quarterly Deal Performance Monitor (QDPM) by Willis Towers Watson 10 years ago. According to the study results, which are based on share-price performance, North American deal makers, on average, significantly underperformed their Regional Index by 6.2 percentage points during the second quarter. This marks the third consecutive quarter in which North American M&A performance was negative, having declined 3.3 percentage points in the first quarter of 2018 and 3.9 percentage points in the last quarter of 2017.
The study also found that North American deal makers focused more on domestic deals, as the percentage of overseas deals for North American acquirers during the first half of 2018 declined sharply, representing just 13% of acquisitions, compared with 20% for the same period in 2017.
“The increasing focus on domestic acquisitions in North America is being fueled partly by the U.S. tax reform law changes, which are encouraging repatriation of capital back to the U.S. This, in turn, makes it easier for U.S. firms to target and invest profits in domestic acquisitions,” said Jim McKay, director, M&A services, Willis Towers Watson. “With that said, the overall M&A performance in North America is down over the past nine months. As a result, targeting domestic acquisitions is not proving to be profitable so far.”
Additional findings revealed by the Willis Towers Watson global study in partnership with Cass Business School, the City, University of London’s business school include:
- Deal types of all sizes, valued from $100 million to over $10 billion, have underperformed the Global Index on average.
- Over a one-year rolling period, acquirers have underperformed overall by an average of 2.7 percentage points.
- Quick cross-sector and cross-border deals all underperformed the Global Index (by 3.2 percentage points, 5.4 percentage points and 6.6 percentage points respectively), a clear trend reversal from the previous quarter.
- The Consumer Staples, Health Care and Telecommunications sectors outperformed their respective indices.
- The Consumer Product and Services, Energy & Power, Financial, Industrial, Material and High Technology sectors underperformed their sector indices.
“The deal-making slowdown and increasing North American acquirer focus on domestic deals is likely to continue given the ongoing economic uncertainty,” said McKay. “Interestingly, the poor performances that have followed completed deals in North America suggest investors right now have very little margin for error. Looking primarily at domestic deals could lead to more competition for a smaller pool of targets. The bottom line is North American deal makers should look for the best deals and not limit themselves to just domestic targets.”
Willis Towers Watson QDPM methodology
- All analysis is conducted from the perspective of the acquirer.
- Share-price performance within the quarterly study is measured as a percentage change in share price from six months prior to the announcement date to the end of the quarter.
- All deals where the acquirer owned less than 50% of the shares of the target after the acquisition were removed; hence, no minority purchases have been considered. All deals where the acquirer held more than 50% of target shares prior to the acquisition have been removed; hence, no remaining purchases have been considered.
- Only completed M&A deals with a value of at least $100 million that meet the study criteria are included in this research.
- Deal data are sourced from Thomson Reuters.
About Willis Towers Watson M&A
Willis Towers Watson’s M&A practice combines our expertise in risk and human capital to offer a full range of M&A services and solutions covering all stages of the M&A process. We have particular expertise in the areas of planning, due diligence, risk transfer and post-transaction integration, areas that define the success of any transaction.
About Willis Towers Watson
Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 40,000 employees serving in more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
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