The first quarter of 2015 was the busiest for mergers and acquisitionssince Towers Watson’s QDPMrecords began in 2008 and is a continuation of the merger-wave that started mid-2014. The financial performance of acquirers has also continued during this period having closed deals that outperformed the market by 2.5 percentage points (pp).
The research – run in partnership with Cass Business School – also reveals that the market for large deals (over $1 billion) returned in the first quarter of 2015 with 41 having already closed; an all-time high for the corresponding period. In addition, two mega deals, worth over $10 billion, have already closed this year. Steve Allan, M&A Practice Leader (EMEA) at Towers Watson, said: “This level of M&A activity is unusual for the early part of the year, with pharmaceuticals accounting for the bulk of very large deals completed in 2015 so far. There is a prevailing trend of outperformance for acquirers and consistency across sectors, with acquirers in general outperforming their industry peers, with the notable exception of the financial sector.”
From a geographic perspective, Asia-Pacific was once again the outstanding performer this quarter (21.8pp above the regional index) – a lead it has held since the beginning of 2014. It is followed by Europe and North America, which achieved outperformances of 2.4pp and 1.4pp respectively. The study also shows that the performance of North America is rebounding following a quarter of underperformance and a comparatively lower outperformance in the quarter prior to that. According to the three-year rolling analysis of performance in the research, Asia-Pacific retains the top spot, 7.9pp above its regional benchmark, tailed by European acquirers at 2.7pp and then the North Americans at 2pp above their regional benchmarks respectively. It also shows that the high M&A volumes and number of larger deals coincides with a period when deals are taking longer to complete (measured as the time from announcement to close), suggesting a potential pattern for the remainder of 2015.
Steve Allan said: “It is worth considering that this hive of activity is taking place against a backdrop of political uncertainty in the UK with the budget announcement this week and the election coming up in May, which is affecting what has traditionally been the world’s second largest market. Of course, the first quarter of next year will have similar external pressures and influences with the US election then on the horizon. With this in mind, the current picture is very much a moveable feast, making it impossible to predict how long the current M&A boom will last. But, for the time being at least market confidence appears to remain high.”
