M&A performance in North America and Europe keeps pace with record rate, as slide in China market activity resists recovery

Rhea-AI Summary

The second quarter of 2021 has witnessed record-breaking merger and acquisition (M&A) activity, surpassing previous highs due to a robust economic rebound post-COVID-19. Acquirers outperformed the market by +2.1 percentage points for deals over $100 million, with North America leading the charge, completing 179 deals—a 244% increase from Q2 2020. The first half of 2021 totaled 484 deals, up 58% from 2020. Despite concerns over inflation and interest rates, experts anticipate sustained M&A activity fueled by corporate restructuring and technological acquisitions as companies adapt to a changing landscape.

Positive

• Record-breaking M&A activity with 278 deals in Q2 2021, highest ever for that quarter.
• North American acquirers performed well, completing 179 deals, a 244% increase from Q2 2020.
• Acquirers outperformed M&A index by +2.1 percentage points, indicating strong buyer performance.
• Total of 484 deals completed in the first half of 2021, up 58% from the same period in 2020.

Negative

• Concerns about potential inflation spike later in the year which could affect M&A activity.
• Asia Pacific acquirers underperformed their regional index by -0.7 percentage points, with only 32 deals in Q2 2021.

ARLINGTON, Va., July 07, 2021 (GLOBE NEWSWIRE) -- Global merger and acquisition (M&A) activity has set new records in the second quarter, eclipsing previous highs reached in the first three months of the year and putting 2021 on track to be the most active year ever. The unprecedented surge in dealmaking follows a robust rebound in economic confidence, as companies race to remake themselves in the face of a post-COVID-19 world and sweeping technological change.

Based on share price performance, buyers outclassed the wider market by +2.1 percentage points (pp) for deals valued over $100 million in the second quarter of 2021. According to Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM), this is the first time since 2017 that acquirers have managed to outperform for two consecutive quarters. For the one-year rolling period, acquirers bettered the M&A index by +3.2 pp on the back of a very strong first quarter.

“This is one of the busiest times we’ve ever seen, with the M&A market in full-rebound mode across nearly every sector, propelled by cash-rich corporates under pressure to reorganize in response to COVID-19,” said Duncan Smithson, senior director, Mergers and Acquisitions, Willis Towers Watson.

“Concerns persist that inflation could spike later this year, triggering a hike in interest rates and an end to a record M&A boom; however, such fears seem premature with the current frenzy of activity fuelled by market dynamics likely to sustain or even accelerate deal flow in the second half of 2021, namely ongoing pressure to deploy capital, acquire technological capabilities and respond to rising shareholder activism,” added Smithson.

Run in partnership with the M&A Research Centre at The Business School (formerly Cass), the data show that the surge in deals and improved performance, which started toward the end of 2020 after plummeting in the early days of the pandemic, remains largely due to activity in North America and Europe.

For the third consecutive quarter, with SPACS continuing to play a large part, North American acquirers outperformed their regional index (+1.6 pp), as volumes increased sharply by 58% since the previous quarter and by 244% compared with Q2 2020 (52 to 179 deals), resulting in the region’s highest ever figures for any quarter since 2008.

Buyers from Europe continued their strong form by outperforming their regional index by +6.4 pp with a burst of activity in Q2 2021 and 59 deals completed. This too was an all-time high for a second quarter. Meanwhile, Britain clearly remains an attractive M&A destination for non-U.K. acquirers that, undeterred by Brexit and a strong FTSE 100 performance, continue to demonstrate interest in buying U.K. companies. U.K.-based deal makers consistently outperformed their regional Index over the past year (+11.4 pp).

In contrast, Asia Pacific acquirers underperformed their regional index by –0.7 pp with only 32 deals closing in Q2 2021, the lowest since 2014. China also completed the smallest number of deals since 2013, as Chinese acquisition volumes continue to fade from a peak in 2015.

M&A activity has clearly continued the momentum gained following an explosive first three months of 2021 as acquisition-hungry buyers completed more deals than any second quarter on record (278 deals), according to these latest results from the Willis Towers Watson index. This is a significant upswing, even when compared with the brisk pace set in the first quarter of 2021 (206 deals).

The data reveals that the first half of the year has also been a record-breaking period with 484 deals completed, 58% higher than the same period in 2020 (307 deals), when the global economy came to a halt because of the pandemic. This is the highest ever figure recorded for the January to June period since Willis Towers Watson launched its M&A index in 2008.

“Companies are pressing the reset button in response to the pandemic, restructuring to build resilience, reduce costs and reposition for future growth, effectively accelerating pre-existing trends such as digital transformation and changes in consumer behavior,” said Smithson. “Robust sell-side activity driven by companies continuing to divest non-core assets points to a strong M&A outlook for the remainder of 2021.

“Post-COVID-19, attention will return to the growing wave of decarbonization, perhaps the greatest global disrupter in the years and decades to come. As more companies commit to wholesale transformation of business and operating models to meet aggressive net-zero goals, M&A looks certain to be pivotal in this low-carbon transition. In a process that will create winners and losers, quality due diligence and improved integration will be increasingly important for successful, profitable and equitable deals.”

Willis Towers Watson 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 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, optimize 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.

Media contact

Ed Emerman: +1 609 240 2766
eemerman@eaglepr.com

 

FAQ

How many M&A deals were completed in Q2 2021?

A record 278 M&A deals were completed in Q2 2021.

What was the performance of acquirers compared to the market in Q2 2021?

Acquirers outperformed the wider market by +2.1 percentage points for deals valued over $100 million.

What regions are leading in M&A activity as of Q2 2021?

North America and Europe are leading in M&A activity, with North America showing a 244% increase in deal volume compared to Q2 2020.

What is the outlook for M&A activity for the rest of 2021?

Experts predict a continued strong M&A outlook driven by corporate restructuring, technological acquisitions, and shareholder activism.

What is the significance of the 484 deals in the first half of 2021?

The 484 deals represent a 58% increase compared to the same period in 2020, marking a record high for the January to June period since 2008.