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Global M&A slowdown to continue in 2020, yet challenging conditions offer springboard to better deals

A drop in North American deals will likely drag down global M&A activity and points to a more selective approach to acquisitions


January 9, 2020

ARLINGTON, VA, January 9, 2020 — The global M&A market, with performance in steady decline since its peak in 2015, is forecast to struggle adding value in 2020; this is based on long-term data compiled by Willis Towers Watson and Cass Business School. Acquirers worldwide underperformed the Global Index by -5.0 percentage points (pp) over the past year for deals valued over $100 million1, based on share-price performance, and have now on average failed to add value from deals for three consecutive years. 

Global dealmaking is also at its slowest pace in six years, with 774 transactions over $100 million completed worldwide in 2019, significantly less than 2018 (904) and the lowest annual volume recorded since 2013 (720). Forty-two per cent of these deals were unable to add shareholder value in 2019.

Global M&A deals – average performance
  2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Average Annual Performance (percentage points)* 3.2 4.0 2.7 -0.7 4.5 5.5 10.1 5.4 -1.3 -3.0 -5.0

*The figures in the table show the annual median-adjusted performance of all acquirers.

“Last year may have ended with a flurry of deals, but the global picture for mergers and acquisitions was patchy at best,” said Duncan Smithson, senior director, M&A, Willis Towers Watson. "As regulatory, political, trade and economic uncertainties persist, the market will likely continue at a slow pace in 2020, with companies in wait-and-see mode, particularly in North America where many transactions are on hold due to trade tensions, a slowing US economy and because presidential election years tend to bring market volatility.”

2020 M&A predictions

Based on short- and long-term global trends revealed by the data, as well as conversations with clients and colleagues, Smithson shares M&A predictions for 2020:

  1. U.S. leads M&A slowdown

    Completed deals are expected to remain low in 2020, driven by a slowdown in US M&A activity. In particular, the annual volume of large deals (valued over $1 billion) in 2019 was 173 – the lowest for five years. Market reluctance to take on big deals may also signal companies stepping up preparations for a recession.

  2. Europe to retain top spot

    European dealmakers topped the global M&A rankings in 2019 for a second consecutive year, outperforming their regional index by +1.9 pp, and we expect this positive trend to continue. Meanwhile, deal volume in the UK last year (31) was at its lowest for a decade, and volume will stay low as long as the risk of a cliff-edge no-deal Brexit remains, keeping business investment at bay for much of 2020.

  3. China M&A unlikely to improve

    Dealmaking momentum in China plummeted from a record high 243 deals in 2015 to just 72 in 2019, as trade uncertainties and recent fears of a global recession took hold. This slowdown, in part due to a sharp decline in outbound Chinese acquisitions, is consistent with a wider trend for fewer M&A deals across Asia Pacific and is expected to continue in 2020. Marginally improved deal performance by Asia Pacific dealmakers in 2019 suggests some improved stability after a turbulent few years.

  4. Slower times to close expected

    With deals completed in 2019 taking on average 141 days to execute compared to 120 days in 2018, the time taken to complete M&A transactions in the year ahead is likely to increase further. Completing cross border deals, in particular, will likely get harder, slowed down by more rigorous due diligence and the need to prepare for greater regulatory scrutiny.

  5. Private equity and acqui-hire deals on the rise

    Alternative investors such as private equity buyers, armed with record levels of unspent capital, will likely be increasingly active in 2020, completing larger deals and entering more corporate joint ventures. Their pursuit of rapid returns will however be challenged by a slowing economy, geopolitical strains and regulatory demands. We also expect the rising trend of acqui-hire deals (those completed with the precise intent of acquiring talent a buyer could not otherwise hire) to gather pace in 2020.

“Market conditions are increasingly challenging, yet many investors with plenty of dry powder remain cautiously optimistic about the year ahead,” said Smithson. “Where deal volume has gone down, our analysis often reveals performance has on average improved, e.g., in Europe the last two years. This highlights the strengths of a more disciplined market striking thoughtful, strategic deals with greater care and due diligence. Key drivers for pursuing acquisitions in 2020, meanwhile, are likely to remain unchanged, as companies seek access to new markets or respond to tech disruption by acquiring the latest technology or highly skilled workers.”

Willis Towers Watson Quarterly Deal Performance Monitor 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 in which the deal closes.
  • 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 Willis Towers Watson M&A

Willis Towers Watson’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 Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving in more than 140 countries and markets. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.

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