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, said Willis Towers Watson recently when releasing its Quarterly Deal Performance Monitor (QDPM).
Based on share price performance, the latest results from Willis Towers Watson’s QDPM, run in partnership with the M&A Research Center at The Business School (formerly Cass), show that buyers outperformed the MSCI World Index1 in the third quarter of 2020, with a performance of +1.5 percentage points above the index, according to WTW.
This is the first positive performance by acquirers since the third quarter of 2017 (+0.7 percentage points), the firm noted.
However, deal volumes are at their lowest level in over a decade (since Q3 2009), with just 121 deals completed in the past three months, WTW pointed out.
The ongoing economic impact and uncertainty caused by the global pandemic have continued to depress deal completions globally, the firm added.
“It is too early to interpret the flurry of announced deals in recent months as a sign that M&A is on the rebound,” said Duncan Smithson, senior director, M&A, Willis Towers Watson. “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, fueled by an enduring pandemic, economic and political uncertainty, buyers need to be both bold and careful.”
Asia Pacific maintains a positive trend
Asia Pacific continues the positive performance recorded in the first half of 2020 by outperforming its index with a performance of +4.4 percentage points, with 35 deals closed in the third quarter of 2020, said WTW.
For the first time since 2017, Asia Pacific acquirers have achieved two consecutive quarters of outperformance, WTW added.
“Instead of collapsing under the weight of COVID-19, M&A deals continue to defy gravity,” said Smithson. “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.”
Deal makers in North America had their worst quarterly performance
Meanwhile dealer makers in North America significantly underperformed their regional index by –8.6 percentage points, with 52 deals completed in the third quarter of 2020, and jointly completed the lowest number of deals since 2009 (on par with the second quarter of 2020), according to WTW.
European acquirers are resilient, the firm pointed out.
Buyers in Europe are currently +20.4 percentage points above their regional index with 30 deals closing in the third quarter of 2020, WTW noted, adding that this is the first time in two years that Europe has recorded four consecutive quarters of positive performance.