Skip to main content

M&A market slump continues

Quarterly Deal Performance Monitor — Q2 2019

Mergers and Acquisitions
Mergers and Acquisitions

By Jana Mercereau and Duncan Smithson | July 26, 2019

The global dealmaking market has now underperformed for an unprecedented seven consecutive quarters, sounding warning bells for future deals.

Europe rallies in the last two weeks of Q2 to make it the only region to outperform the index this quarter

Companies making M&A deals in North America and Asia Pacific lost shareholder value in the second quarter, with Europe the only region to outperform the MSCI World Index. The latest results from Willis Towers Watson's Quarterly Deal Performance Monitor (QDPM), run in partnership with Cass Business School, show the global market has now underperformed for an unprecedented seven consecutive quarters.

Asia-Pacific acquirers have shown the worst performance of all regions with an underperformance of –5.6 percentage points (pp), followed by an underperformance of North American acquirers at –4.4 pp below their regional indexes. Europe rallied in the last two weeks of the quarter and outperformed the index by 1.0 pp and remains the only region where acquirers are still outperforming the index for both the one-year and three-year rolling periods.

Bar graph illustrating quarterly analysis M&A global performance
Figure 2. Acquirer returns adjusted to the MSCI regional index

NB: The share price returns have been adjusted to index returns over the corresponding period. The MSCI World Index is used as default, unless stated otherwise.

The global M&A market peaked in 2015 and has been on the slide ever since, as more stringent regulations, protectionism and political uncertainty continue to frustrate dealmaking. M&A activity is a barometer of business confidence and the rapid drop in deal volume in the last six months, especially in the U.S. market, suggests the impact of geopolitical, trade and tariff uncertainties has been brutal, fuelling board room uncertainty around the world.

Until there is less turbulence in the global markets, there is a good chance that even fewer deals will be announced in the second half of 2019.

Based on share price performance, additional findings revealed by the study include:

  • Deal volumes at the lowest level since Q2 2013 for any second quarter, with 163 deals completed so far in Q2 2019. This is attributed to a flat volume of deals in North America (lowest since Q2 2009), Europe, and Asia Pacific (lowest since Q2 2013).
  • For the first time in five years, there were no completed mega deals in Q2 2019 (those valued at over $10bn).
  • Most deal types underperformed the index. The biggest underperformance for the quarter are deals that are slow to close, currently at –10.8 pp. Both intra-regional deals and domestic deals are currently at –7.2 pp and –9.7 pp.
  • In a reversal trend, cross-regional, large, cross-border and deals that are quick to close have outperformed the index by +4.1 pp +7.1 pp, +3.8 pp and +4.9 pp respectively.
  • The three-year rolling average performance is currently at –0.5 pp, while the performance since the launch of the Index in 2008 remains positive at +2.6 pp.

In line with the negative performance of global acquirers, U.K. dealmakers also underperformed in Q2 2019. Over a three-year rolling period, however, U.K. dealmakers outperformed the market by +3.7 pp, despite the Brexit turmoil. Foreign companies also continue to take advantage of the devaluation of sterling to buy British firms, outperforming the Index by +2.7 pp during the same period.

Digital disruption will be a major factor, as large companies attempt to assimilate technology to become more efficient and better reach end users.

Corporate clarity will continue to be a key theme driving M&A activity, as pressure increases on companies to review their business structures and assess how best to unlock value from deals. Digital disruption will also be a major factor shaping the market, as large companies attempt to assimilate technology to become more efficient and better reach end users by buying boutique firms, resulting in fewer billion-dollar megadeals.

Willis Towers Watson 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.

Head of Human Capital M&A, Great Britain

Senior Director, Mergers and Acquisitions

Download PDF
Title File Type File Size
M&A market slump continues PDF .9 MB
Related content tags, list of links Article Mergers and Acquisitions Mergers and Acquisitions
Contact Us