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Q1 2020 - Lessons from the 2008 crash urge long-term view to M&A

Q1 2020 Quarterly Deal Performance Monitor

By Jana Mercereau and Duncan Smithson | May 6, 2020

The performance of the global M&A market has been in steady decline since a 2015 peak.
Mergers and Acquisitions
Mergers and Acquisitions|Pandemic Risk and Response

The performance of the global M&A market has been in steady decline since a 2015 peak, with buyers now having failed to add value for 10 consecutive quarters, according to the latest data from Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM), run in partnership with Cass Business School.

Based on share-price performance, acquirers have underperformed the Global Index by 2.1 percentage points in the first three months of 2020.

Based on share-price performance, acquirers have underperformed the Global Index1 by -2.1 percentage points (pp) in the first three months of 2020, and -4.9pp over the past year, for deals valued over $100 million. This contrasts with a longer-term view of performance, which shows M&A deals have still outperformed the market by +2.3pp since the launch of the QDPM in 2008.

Bar chart shows the quarterly analysis of M&A from 2008 for each quarter.
Figure 1. M&A quarterly analysis

Despite Brexit, European buyers are in top spot for Q1 2020, outperforming their regional index by +9.0 pp, followed with underperformances by acquirers from both North America (-4.2 pp) and Asia Pacific (-5.8 pp).

Bar chart shows the acquirer returns in Q12019 and Q12020.
Figure 2. Acquirer returns adjusted to the MSCI regional index

With 170 deals completed in the first three months of 2020, deal volumes are significantly down compared to the previous quarter and the lowest since early 2014. The study looks at deals that closed in the quarter, and therefore the impact of COVID-19 on this quarter’s volumes will most likely be focused on deals closed by Asian acquirers, with other regions likely to show the impact reflected in the number of deals closing in future quarters.

All deals in this latest report are essentially “pre-pandemic”, having been completed, rather than announced, in the first quarter of 2020. So, while our results reveal a continuing downward trend in both M&A deal performance and volume, fear and volatility driven by COVID-19 have since sent financial markets in an accelerated tailspin and significantly disrupted the normal flow of M&A deals.

The full magnitude, scope and length of the virus’ impact will be largely determined by the success of the world’s response to the outbreak — which is still evolving. What we do know is that lessons learned from previous downturns, such as the 2007-2008 financial crisis, can provide business leaders with a perspective on future recovery and growth. We must learn from the past and use this time as a catalyst for new and creative ways of working, which is likely to impact future dealmaking.

The financial crisis 12 years later: Five lessons for investors

As the outbreak continues to move quickly, erratic markets are already lending themselves to irrational decisions, with many deals now finding themselves in limbo. That being said, our analysis suggests M&A activity will not come to a complete standstill, as reduced share prices and many organisations looking to restructure will create new M&A opportunities, and all will need to find innovative ways to capture market share.

M&A activity will not come to a complete standstill, as reduced share prices and many organisations looking to restructure will create new M&A opportunities.

Although today’s economic environment is different in many ways to 12 years ago, five lessons in particular appear as relevant as ever for business leaders planning their path through and beyond this current crisis:

  1. 01

    Focus on people

    Business strategies are executed by people. Prior crises have shown that organisations that can help keep their deal teams calm and focused, avoid jumping too fast at opportunities that may appear to be too good to be true, but move at pace when opportunities arise, will thrive.

    This is even more true today as the current health-driven crisis has real implications that affect all of us personally and go beyond the financial. Leading organisations have a clear immediate focus on protecting and supporting their people, including their deal teams and their broader employee populations.

  2. 02

    Advantage in adversity

    In the current downturn, a wave of distressed, cheaper assets is likely to come to market. In order to turn adversity into opportunity, early and thoughtful asset allocation analysis is the only tried and tested remedy. Executing strategic investments well – in good times and bad – demands a cool head with buyers exercising cost discipline and financial prudence, and detecting opportunities that offer reliable returns in reasonable payback periods.

  3. 03

    The near-term is essential, but don’t lose focus on the longer-term

    During the 2007-2009 recession, companies prioritised short-term actions over longer-term initiatives, tending to act reactively rather than proactively. All companies must attend to short-term concerns to ensure viability, but those able to stay the course and focus on strategic long-term investments will lay the foundation for continued success once the crisis ends.

  4. 04

    M&A transactions will take longer and become less predictable

    In 2008, a lack of available credit, plunging stock markets and worldwide financial crisis undermined companies’ ability to make acquisitions, ending five years of deal growth.

    Fast forward 12 years and closing deals is just as complex, with dealmakers working from home, site visits curtailed, leadership and expert meetings going virtual, debt financing harder to secure and delays in regulatory approval as governments and regulators cope with the impact of COVID-19.

    In response, existing technologies such as virtual data rooms and video conference calls can be easily harnessed to facilitate the due diligence process. As this situation unfolds and more implications for M&A transactions arise, stakeholders will be required to show greater agility and creativity if they are to seize opportunities.

  5. 05

    Implementation plans and synergy goals to be reviewed

    Deals closed as recently as Q1 2020 will need to be reviewed in the light of current conditions, and synergy-playbooks for future deals will need to be reassessed. This reassessment will be both in light of current market conditions and also the broader brand and reputational risks of workforce restructuring, and being open to accusations of taking advantage of a global health crisis. A long boom in financial markets has caused buyers to complain that so much money has been chasing too few deals, making attractively priced assets hard to find. For investors that have been keeping their powder dry, now is the time to look past short-term events and take a view on the long-term value of companies. By looking for value and going through the process of repricing risk and taking selective opportunities, taking the time to review the target’s culture against their own, buyers will find genuine dealmaking opportunities.


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.


Head of Human Capital M&A, Great Britain

Senior Director, M&A

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