M&A deals plunge as tougher conditions than expected spook markets, with North America stuck in grip of persisting slowdown
06 July 2023 - 11:05PM
Global M&A suffered a record decline in the first half of 2023
as interest rate rises and economic uncertainty hit financing,
according to research on completed deals from WTW’s Quarterly Deal
Performance Monitor (QDPM)1.
Run in partnership with the M&A Research
Centre at The Bayes Business School, the WTW data reveals activity
for deals valued over $100 million slowed significantly around the
world during the first half of 2023, with a total of 280 deals
completed compared to 441 during the same period in 2022. This
represents a 37% drop in volume and the lowest figure for the first
half of a year since 2009.
The challenging macroeconomic conditions are
acutely evident in the North American market, where volumes fell
for an unprecedented sixth consecutive quarter from a near all-time
high of 173 deals in the third quarter of 2021 to just 61 deals
between April and June 2023.
In addition to the low number of M&A deals,
acquirers that completed transactions in 2023 also underperformed
the market by -2.1pp (percentage points). This represents a marked
decline following the positive performance of +4.4pp in the second
half of 2022. However, despite the continued volatility, global
M&A still achieved an overall positive performance of +1.4pp
for the last 12 months.
David Dean, Managing Director, Southeast Region,
North America at WTW, said: “A perfect storm of higher inflation,
interest rates, capital costs and greater regulatory scrutiny,
combined with major geopolitical headwinds and a banking crisis,
have triggered a steeper drop-off in M&A activity than
anticipated by the market.
“Buyers have had to shift gears to adapt to a
more cautious M&A environment, although deal conversations have
continued throughout this period of uncertainty. With these
disruptive trends expected to continue into the second half of
2023, potential buyers will be kicking the tires a bit harder as
they seek deals to address strategic priorities, expand into new
markets and fill capability gaps.”
The deal performance during the first six months
of 2023 would have been substantially worse if not for the
Asia-Pacific region, where buyers continue to outperform the rest
of the world. APAC acquirers outperformed their regional index by
+10.9pp. With 72 deals closed in H1 2023, the region still saw a
25% drop in volume compared to H1 2022 (96 deals).
In contrast to the APAC region, North American
acquirers underperformed their index between January and June by
-5.9pp, while dealmakers from Europe underperformed their regional
index by -8.3pp.
The WTW data also shows:
-
Only three mega deals closed in the first half of 2023 compared to
12 deals in H1 2022.
- Performance of acquirers in North America for the second
quarter of 2023 at -10.3pp is the second worst on record, exceeded
only by the same quarter in 2020, at the height of the Covid-19
pandemic. Acquirer performance in Europe during the last three
months is the worst on record at -10.8pp.
-
Asia Pacific buyers have now achieved a positive performance for
eight consecutive quarters. To put this in context, buyers in North
America and Europe have only recorded two and one positive quarters
respectively during the same period.
-
Intra-regional deals have increased for three successive quarters
(compared to cross regional deals) and intra-sector deals also
experienced a big jump from 57% in the first quarter of 2023 to 67%
in the latest quarter (compared to cross sector deals), indicating
a clear trend of buyers seeking deals closer to home.
Dean said: “When inflation stabilizes and credit
markets re-open, we expect deal appetite to increase considerably
fueled by pent-up demand with digital transformation, portfolio
rebalancing and ESG issues continuing to be key drivers.
“Larger deals will remain tough to pull off due
to increasing anti-trust and regulatory pushback. Instead,
companies are more likely to pursue small to midsize deals, which
are easier to complete than megadeals and lower risk in today’s
difficult financing environment. To achieve performance objectives
underwriting deal financials, organizations will need to execute
integration plans more effectively and address known obstacles like
culture differences with more intentionality. Nonetheless in the
race to acquire - whatever the size of deal - due diligence that is
faster, deeper and better focused, will prove even more critical in
a volatile market.”
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 which meet the study criteria are
included in this research.
- Deal data sourced from
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 2766eemerman@eaglepr.com
Ileana Feoli: +1 212 309 5504ileana.feoli@wtwco.com
___________________________________
1 The M&A research tracks the number of completed deals over
$100m and the share price performance of the acquiring company
against the MSCI World Index, which is used as default, unless
stated otherwise.
Willis Towers Watson Pub... (NASDAQ:WTW)
Historical Stock Chart
From Jun 2024 to Jul 2024
Willis Towers Watson Pub... (NASDAQ:WTW)
Historical Stock Chart
From Jul 2023 to Jul 2024