Buoyant M&A market continues despite economic instability

Rhea-AI Summary

WTW reports robust M&A activity with the third highest half-year volume since 2008, completing 441 deals over $100 million in H1 2022. The Asia Pacific region outperformed others, while North America and Europe lagged. Despite slowing deal activity from 2021's record of 484 deals, transaction volumes remain above pre-pandemic levels. However, market volatility has negatively impacted deal performance, with buyers underperforming the market by 4.8 percentage points. The average deal closure time increased, with 60% exceeding 70 days.

Positive

• Third-highest half-year global M&A volume recorded with 441 completed deals.
• Asia Pacific M&A outperformed other regions with a 7.2 percentage point gain.
• The number of megadeals over $10 billion increased to 12 from 10 YoY.

Negative

• North American M&A underperformed by 6.1 percentage points.
• European M&A underperformed by 5.9 percentage points.
• Deal closure times increased, with 60% taking over 70 days.

Deal makers recorded the third-highest half-year volume of deals completed on record, though volatility risks M&A disruption during months ahead

• Global M&A volumes hit third-highest total on record for opening six-month period.
• Asia Pacific M&A is outperforming the rest of the world.
• North America M&A is underperforming by –6.1 percentage points, Europe M&A by –5.9 percentage points.
• Deals in 2022 are taking longer to complete compared with last year.

ARLINGTON, Va., July 13, 2022 (GLOBE NEWSWIRE) -- Reports of global merger and acquisition (M&A) activity entering a dry spell appear premature with deal makers recording the third-highest number of completed deals in an opening six months since M&A deal research by WTW began in 2008, run in partnership with the M&A Research Centre at Bayes Business School. According to analysis based on WTW’s Quarterly Deal Performance Monitor (QDPM), the only years that have surpassed the 441 deals (valued over $100 million) completed in the first half of 2022 were 2021 — during an exceptional pandemic rebound — and 2015. WTW (NASDAQ: WTW) is a leading global advisory, broking and solutions company.

Although deal activity has slowed from its record-setting 2021 pace, when 484 deals were completed in the first six months, M&A volumes remain buoyant this year with the number of transactions continuing to exceed pre-pandemic levels, according to the QDPM data.

Deal performance, in contrast, has struggled to defy gravity and has clearly been affected by market volatility. Amid soaring inflation, rising interest rates, geopolitical tensions and the ongoing COVID-19 pandemic, buyers underperformed the wider market¹ by –4.8 percentage points, based on share price performance, during the first six months of 2022.

The average time to close a deal has also increased in 2022, with 60% of transactions during the first six months taking over 70 days (the long-term average time between announcement and closing), compared with 54% in the first half of 2021. In contrast with last year when competition for assets was fierce and buy-side deal teams had to work with compressed diligence periods to stay competitive in the bid process, market volatility in 2022 has raised the stakes for buyers, advocating caution and increasing due diligence.

“While there has been a slowdown this year, following the record-setting pace of 2021 thanks in part to booming markets and widespread stimulus measures during the pandemic, the pipeline remains very healthy, even with deal execution becoming harder due to increased volatility and macro concerns,” said Duncan Smithson, senior director, HR Mergers and Acquisitions, WTW.

The number of megadeals (valued over $10 billion) was up to 12 in the first half of 2022 compared with 10 in the same period last year, signaling that companies have not been put off from completing the larger deals planned and announced during the post-pandemic boom, despite the broader market turmoil of the first half of 2022.

All regional acquirers, except those in Asia Pacific, underperformed in the first half of 2022. Asia Pacific acquirers outperformed their regional index, showing an overall performance of +7.2 percentage points with 96 deals closed. Meanwhile, North American acquirers underperformed their index by –6.1 percentage points with 220 deals completed in the first six months of 2022, and deal makers from Europe underperformed their index by –5.9 percentage points with 102 deals in the same period.

Smithson said: “Debt is still relatively cheap by historical standards, and abundant dry powder from private equity firms and SPACs [special purpose acquisition companies] raised during 2021 ensure the appetite for deals remains strong, although clear risks lie ahead. Geopolitical uncertainty, rising interest rates and supply chain disruptions create a volatile mix that will make deals more complex, take longer and require a new focus from buyers on how to improve the odds of success.

“At a time when change fatigue is at an all-time high, with the pandemic in its third year, clear and consistent communication to employees and the market will prove more critical than ever to preventing greater disruption and confusion, and ensuring deals get over the finish line, create value and drive long-term growth.”

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 sourced from Refinitiv.
  

About WTW M&A
WTW’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 WTW
At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.

Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you.

Learn more at wtwco.com.

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

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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.

FAQ

What was the M&A volume for WTW in the first half of 2022?

WTW recorded 441 completed deals valued over $100 million in H1 2022.

How did Asia Pacific M&A perform compared to other regions?

Asia Pacific M&A outperformed with a 7.2 percentage point gain.

What are the challenges facing M&A in 2022 according to WTW?

Challenges include market volatility, rising interest rates, and geopolitical tensions.

How long are deals taking to close in 2022?

In H1 2022, 60% of transactions took over 70 days to close.

What trends were observed in megadeals in 2022?

The number of megadeals over $10 billion rose to 12 in H1 2022.