Global dealmakers achieved a second consecutive quarter of market outperformance in the last three months of 2022, according to research on completed deals from WTW’s Quarterly Deal Performance Monitor (QDPM). Based on share price performance, companies making M&A deals outclassed the wider market1 by +5.2 percentage points for acquisitions valued over $100 million between October and December 2022. This follows a positive performance of +3.9 percentage points in the previous quarter.
Run in partnership with the M&A Research Centre at Bayes Business School, the full-year figures for 2022 still reveal a slight underperformance by buyers of –0.8 percentage points compared with non-acquirers, despite the upturn in acquirer performance in the second half of the year. This contrasts with a positive full-year performance of +1.4 percentage points in 2021. Deal volume in 2022 was also significantly down by 19%, with 853 deals completed globally, compared with 1,047 deals in 2021, driven by a marked slowdown in M&A activity in North America.
“While geopolitical tensions, inflation and rising interest rates had an inevitable impact last year on deal activity and performance, the extraordinary pace set in 2021 was also unsustainable,” said Duncan Smithson, senior director, M&A Consulting, WTW. “Rather than being interpreted as a downward trend, current M&A volumes reflect a return to healthy pre-pandemic levels.
“Macroeconomic uncertainty will persist in 2023, yet deals will still get done. Despite the bar being raised on difficulty, the positive M&A performance sustained over the past two quarters clearly indicates the ability of strategic buyers to succeed in challenging environments. By looking at target companies with an even finer lens, investing more time and resources to ensure quality due diligence, dealmakers will be well placed to generate value and drive longer-term growth from deals.”
*The figures in the table show the annual median-adjusted performance of all acquirers. Any individual acquirer may have performed better than the median – in some cases, significantly better.
North America led the slowdown in activity, with acquirers closing 402 deals in 2022, 35% fewer compared with the 614 deals completed in 2021. In contrast, deal volumes have been more stable in Europe and Asia Pacific, with both regions seeing a marginal increase in M&A activity during the past 12 months. European acquirers completed 203 deals in 2022 compared with 199 in 2021, while 200 deals were completed by Asia Pacific dealmakers in 2022 compared with 196 the previous year.
While Asia Pacific buyers outperformed their regional index by +10.1 percentage points for 2022, the full-year figures show an annual underperformance across other regions, with North American and European buyers underperforming their industry peers by –1.9 percentage points and –5.7 percentage points, respectively.
In contrast to the full-year results, the final three months of 2022 showed a stronger global performance by dealmakers not only in Asia Pacific (+10.5 percentage points) but also in North America where acquirers also strongly outperformed their regional index (+9.4 percentage points). Only dealmakers from Europe continued to underperform their index, doing so by –2.6 percentage points during the final quarter of 2022.
5 M&A trends for 2023
Duncan Smithson shares his top trends for the year ahead:
Footnote
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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