Global M&A is set to grow again after losing steam in the final three months of 2023, said WTW recently.
According to WTW’s Quarterly Deal Performance Monitor (QDPM), companies completing M&A deals in the fourth quarter of 2023—based on share price performance—underperformed the wider market by –13.6 percentage points for acquisitions valued over $100 million between October and December 2023.
This result is an all-time low for any quarter since 2008 (when this study began) and follows a negative performance of –8.7 percentage points in the previous quarter, WTW noted.
Run in partnership with the M&A Research Centre at Bayes Business School, the full-year figures for 2023 reveal an underperformance by buyers of –7.2 percentage points compared with non-acquirers.
This compares with the marginally negative full-year performance of –0.8 percentage points recorded in 2022, WTW said.
Despite these latest results, the long-term 15-plus-year trend shows deals have outperformed the market since the global financial crisis of 2007 – 2009 (+1.5 percentage points), the firm added.
QDPM highlights
- Global M&A deal volume was down by 27%, with 619 transactions completed in 2023 compared with 853 in 2022, driven by persistent inflation, rising interest rates and geopolitical instability.
- Large deals (valued over $1 billion) were down by 30% in 2023, continuing a steady decline that began in 2020, with 145 completed compared with 208 in 2022.
- Eleven mega deals (valued over $10 billion) closed in 2023 compared with 15 in 2022. These numbers potentially indicate a new baseline and return to pre-pandemic levels.
- Asia Pacific was the only region to outperform its regional index (+6.4 percentage points), with 155 deals completed in 2023. As with other regions, however, Asia Pacific volumes were down 23% compared with last year (200 deals in 2022).
- Global M&A deals have been weighed down by geopolitical conflict, recession fears, rising interest rates and the high cost of capital, said David Dean, managing director, Mergers and Acquisitions, WTW.
- Potential for disruption in 2024 remains considerable, exacerbated by a packed election calendar and a complex regulatory landscape raising more hurdles, scrutiny and longer timetables to complete deals, he added.
“Despite these headwinds, inflation and the cost of financing seem to be stabilising, and the record level of dry powder waiting to be deployed suggests a rebound of activity in 2024,” Dean noted. “With transactions facing greater scrutiny, however, successful bids will depend more than ever on exercising a high degree of caution, a focus on ‘best-fit’ deals and thorough due diligence.”
WTW also expects joint ventures, strategic alliances and minority investments to gather pace in 2024 as companies respond to market disruption by sharing and mitigating risk in pursuit of strategic deals, with a renewed focus on technology not only as a source of growth but also to unlock greater value from M&A.
