Global M&A endures headwinds with pickup in first-quarter deal closures
Global mergers and acquisitions (M&A) saw a modest increase in completed deals in Q1 2024 compared to the same period last year, with 166 deals over $100 million. Large deals and mega deals also showed growth. Despite global equity market strength, M&A deals underperformed by -13.1% in Q1 2024. North America and Europe struggled, while Asia Pacific performed better. China's M&A activity dropped significantly. Analysts predict a potential uptick in M&A activity ahead.
Observing the uptick in M&A activity, particularly the increase in large and mega deals, suggests a regained confidence in strategic growth through acquisitions. While the volume of completed deals has risen, the underperformance of these acquiring companies in the stock market is noteworthy. It raises questions about the premium paid and the integration challenges post-acquisition. Investors often scrutinize such deals for the anticipated synergies and cost savings. The data indicating underperformance post-deal completion might reflect market skepticism about the ability of these companies to deliver on their deal theses.
The 11% increase in M&A volume year-over-year is a positive signal for the investment banking sector, likely translating into higher advisory fee revenues. However, the underperformance of acquirers' share prices post-deal might deter some investors. The disparity in regional performance, with North America and Europe lagging behind Asia Pacific, could influence cross-border investment strategies. Financial institutions might recalibrate their focus towards regions with more robust M&A performance. Moreover, the slump in Chinese M&A activity is a red flag, potentially indicative of regulatory challenges or a strategic shift in outbound investment philosophy.
The stabilization of interest rates mentioned in the article could be a double-edged sword for M&A. On one hand, it may lower the cost of financing deals, on the other, it could reflect broader economic concerns that may dampen long-term investment return expectations. The geopolitical and election uncertainties cited could be contributing to market volatility, which in turn affects the M&A landscape. The economic implications of these findings are significant, as M&A activity is often seen as a barometer for corporate confidence and economic health.
04/03/2024 - 10:02 AM
NEW YORK, April 03, 2024 (GLOBE NEWSWIRE) -- Global mergers and acquisitions (M&A) achieved a modest rise in completed deals in the first quarter of 2024 compared with the same period last year, according to research from leading global advisory, broking and solutions company WTW’s (NASDAQ: WTW) Quarterly Deal Performance Monitor (QDPM).
Run in partnership with the M&A Research Centre at Bayes Business School, part of City, University of London, the data reveal that 166 deals valued over $100 million were completed globally during the first quarter of 2024. This compares with 150 deals completed during the same period in 2023, representing an 11% increase in volume.
Following four consecutive quarters of decline, the volume of large deals (valued over $1 billion ) may also be stabilizing. With 34 large deals completed in the first quarter of 2024, this represents the second quarterly rise in a row, following 33 deals completed in the fourth quarter of 2023 and 32 during the previous quarter. Also, five mega deals (valued over $10 billion ) closed in the first quarter of 2024 compared with just one in the first three months of 2023.
Compared with strong equity market performance worldwide, however, companies completing M&A deals underperformed the wider market1 by –13.1 percentage points for acquisitions valued over $100 million between January and March 2024. This figure is based on share price performance and continues the negative performance of the previous quarter (–13.6 percentage points).
Despite these latest performance figures, the long-term 15-plus-year trend still shows M&A deals to have outperformed the market since the global financial crisis (+1.5 percentage points).
“2023 proved to be a very challenging year for acquisitions globally,” said David Dean, managing director, Mergers & Acquisitions, WTW. “And despite receding inflation fears, several factors are combining to have a chilling effect on dealmaking, including weak global economic growth, geopolitical instability and ongoing uncertainty surrounding the U.S. presidential election.
“However, there may be some light at the end of the tunnel,” continues Dean. “Worries over a possible recession are dimming, and there are predictions for a turnaround in M&A completions, which are supported by a recent jump in IPO activity. Additionally, private equity firms are facing heightened pressure to step up their M&A activity and utilize their committed capital. In fact, we may very well see a more active year ahead given the apparent uptick in deal announcements in late 2023 and early 2024.”
The M&A market in North America experienced a challenging first three months of the year, with acquirers underperforming their regional index for the fifth consecutive quarter, following 97 completed deals. The level of underperformance (–14.1 percentage points) was the region’s third worst ever since the WTW study began in 2008.
European dealmakers also struggled to generate value from transactions. Having not outperformed their regional index since 2021, they underperformed during the period January to March 2024 by –9.2 percentage points, with 37 deals completed.
M&A performance was more robust in the Asia Pacific region, where more positive results have been achieved during the past two years, leading acquirers to record a first-quarter performance of +3.0 percentage points, with 31 deals completed. Notably, deals over $100 million completed in China — the world’s second largest economy — slumped to just nine during the first three months of 2024, the country’s lowest level in over a decade and a fall of over 90% since Chinese corporate M&A deals peaked in 2015.
“It’s too soon to say whether there will be a full market recovery, but conditions for M&A activity are improving. Interest rates have stabilized and may decline at some point this year, and there is less competition for deals. As a result, last year’s wait-and-see attitude to dealmaking may soon be in the rearview mirror,” said Dean.
WTW 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 that meet the study criteria are included in this research. Deal data are sourced from Refinitiv. About WTW M&A
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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.
How many M&A deals valued over $100 million were completed globally in Q1 2024 by WTW (NASDAQ: WTW)?
166 deals valued over $100 million were completed globally in the first quarter of 2024 by WTW.
What was the percentage increase in volume of large deals ($1 billion +) completed in Q1 2024 compared to the previous quarter?
Large deals ($1 billion +) completed in Q1 2024 showed a second consecutive quarterly rise, with 34 deals completed, compared to 33 deals in the previous quarter.
How did companies completing M&A deals perform compared to the wider market in Q1 2024?
Companies completing M&A deals underperformed the wider market by -13.1 percentage points in Q1 2024.
Which region experienced the most challenging M&A performance in Q1 2024 according to WTW's report?
North America experienced the most challenging M&A performance in Q1 2024, with acquirers underperforming their regional index by -14.1 percentage points.
How did European dealmakers perform in terms of generating value from transactions in Q1 2024?
European dealmakers struggled to generate value from transactions in Q1 2024, underperforming their regional index by -9.2 percentage points.
What was the M&A performance in the Asia Pacific region in Q1 2024 according to the report?
The Asia Pacific region recorded a positive performance of +3.0 percentage points in Q1 2024, with 31 deals completed.
How many M&A deals over $100 million were completed in China in the first three months of 2024?
Nine M&A deals over $100 million were completed in China during the first three months of 2024.
What methodology does WTW use for its Quarterly Deal Performance Monitor (QDPM)?
WTW conducts all analysis from the acquirer's perspective and measures share-price performance as a percentage change from six months prior to the announcement date to the end of the quarter.
