Worldwide M&A activity continues to break records
The worldwide M&A market is still setting new records in terms of share performance and volume, according to the latest Towers Watson Quarterly Deal Performance Monitor, though the company warns conditions could be set to change in the near future.
A total of 928 M&A deals were recorded in 2014 by the company’s research, carried out in partnership with the Cass Business School, a figure that represents an increase of 208 deals on 2013 figures and the most deals completed in a single year since before the financial crisis of 2008.
Share prices increases for companies that made acquisitions also streaked ahead of their non-acquiring counterparts, the former out-performing the latter by an average of 5.8 percentage points, compared with 4.5 percentage points in 2013.
Steve Allan, Towers Watson’s M&A practice leader for EMEA, says the level of deals being completed is unlikely to drop in the near future. ‘Market confidence is riding high, even for the complicated larger mergers,’ he explains. ‘But with the more apparent inorganic growth opportunities already taken, we may see some failures making headlines in the near future with latecomers falling off the crest of the merger-wave.’
The research also shows Asian companies made the most efficient acquisitions, with the stock of companies that made M&A deals outstripping the average performance of local indices by 24.7 percentage points. The improvement shown is some way ahead of European acquirers, which bettered local averages by 4.1 percentage points, and those in North America, which finished the year 2 percentage points ahead of regional indices.
Companies are also increasingly carrying out larger and more complex transactions: by the end of 2014, a record-breaking 176 large deals (those worth more than $1 bn) and 12 mega-deals (those worth more than $10 bn) had been completed. Towers Watson’s reporters suggest this trend will continue as balance sheets remain robust, interest rates stay low and healthy markets persist.
‘For acquirers,  will feel more precarious, with the pressure not to get left behind in the race to growth coupled with the fear of not being the one that gets it wrong,’ Allan says. ‘It has been proven time and time again that victory comes from thinking beyond the deal in purely financial terms. Companies that recognize the importance of merging hearts and minds, as well as operations, will be the ones to achieve long-term success in deal making.’