M&A optimism takes firmer hold as momentum continues to build
July 11 2024 - 11:25AM
Global mergers and acquisitions (M&A) activity maintains the
positive momentum achieved at the start of 2024, with deals
completed during the second quarter improving upon the same period
last year, according to research from leading global advisory,
broking and solutions company WTW’s (NASDAQ: WTW) Quarterly Deal
Performance Monitor (QDPM).
Run in partnership with the M&A Research
Centre at Bayes Business School, the data reveal that 166 deals
valued over $100 million were completed globally during the second
quarter of 2024, exactly matching the number of deals closed in the
first three months of the year. The second-quarter figure surpasses
the 130 deals closed during the same period in 2023, representing a
28% increase in volume.
The 35 large deals (valued over $1 billion)
completed in the second quarter of 2024 represent the third
quarterly rise in a row, following 34 deals closed in the first
three months of 2024 and 32 during the previous quarter. Also, with
four mega deals (valued over $10 billion) completed in the second
quarter of 2024, a total of nine mega deals have been closed so far
this year, compared with just three during the first six months of
2023.
Acquisitions completed within the same industry
sector (intra-sector deals) have been rising as a proportion of
overall M&A, compared with cross-sector acquisitions. Since the
start of 2023 intra-sector acquisitions have increased from 57% of
the total in the first quarter of 2023 to 74% in the latest
quarter. This indicates a trend for sellers carving off non-core
assets and buyers seeking deals closer to home in order to
consolidate their own markets.
“If the first half of 2024 is any indication,
dealmaking may be on the verge of returning to pre-COVID levels and
deal behavior,” said David Dean, managing director, Mergers and
Acquisitions, WTW. “The combination of rising market confidence,
anticipated interest rate cuts, improved financing conditions, low
volatility and narrowing valuation gaps will help shake off the
dealmaking doldrums we’ve seen since late 2022.”
Compared with the strong equity market
performance worldwide, which has made valuations more expensive,
companies completing M&A deals have struggled to compete with
the wider market,1 underperforming by –9.3 percentage points
between April and June 2024. This figure is based on share price
performance and continues the underperformance of acquirers from
the previous quarter (–13.1 percentage points).
Despite these latest performance figures, the
long-term 15-plus-year trend still shows that acquirers have
outperformed the market since the global financial crisis, by +1.4
percentage points.
The M&A market in North America remains
challenging. Acquirers underperformed their regional index by
–7.7%, making it the sixth consecutive quarter that buyers have
been outclassed by industry peers. With 90 completed deals, this
also represents a drop in volume compared with the first quarter of
2024 (97 deals).
European dealmakers also struggled to generate
value from transactions. Having last outperformed their regional
index in 2021, they underperformed once more during the period
April to June 2024 by –10.7 percentage points with 34 deals
completed, down from 37 deals closed in the first quarter of
2024.
The M&A data show that once again the Asia
Pacific market fared better, continuing to be the only region to
outperform its regional index. For 10 out of the previous 11
quarters, buyers in the region have outclassed their index in terms
of share price performance, most recently by +1 percentage points
in the second quarter of 2024, with 38 deals closed. This also
represents an increase of seven deals compared with the previous
three months.
Notably, the number of deals completed in China
— the world’s second largest economy — slumped to just three
transactions during the second quarter of 2024. When combined with
the nine deals closed in the first three months, this is the
country’s lowest level of M&A activity for the first six months
of a year since 2010.
“While deal volume is up this year, lingering
inflation, high interest rates and uncertainty surrounding the
upcoming presidential election still pose risks for future M&A
activity. If an M&A rebound is to take shape, we believe
dealmakers will need to lower their risk exposure by exercising a
high degree of caution, focus on ‘best-fit’ deals and thorough due
diligence that allows for extended timelines, coupled with an
effective integration plan that maximizes M&A value,” said
Dean.
WTW 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 LSEG
(formerly Refinitiv).
About WTW M&AWTW’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 WTWAt WTW (NASDAQ: WTW),
we provide data-driven, insight-led solutions in the areas of
people, risk and capital. Leveraging the global view and local
expertise of our colleagues serving 140 countries and markets, we
help organizations sharpen their strategy, enhance organizational
resilience, motivate their workforce and maximize performance.
Working shoulder to shoulder with our clients,
we uncover opportunities for sustainable success—and provide
perspective that moves you. Learn more at wtwco.com.
Media Contacts
Ed Emerman: +1 609 240
2677eemerman@eaglepr.com
1 The M&A research tracks the number of
completed deals over $100 million and the share price performance
of the acquiring company against the MSCI World Index, which is
used as default, unless stated otherwise.
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