M&A optimism takes firmer hold as momentum continues to build
Global mergers and acquisitions (M&A) activity maintained momentum in Q2 2024, with 166 deals over $100 million completed, matching Q1 2024 and surpassing Q2 2023 by 28%.
Thirty-five large deals over $1 billion were closed, continuing a rising trend. Four mega deals over $10 billion were completed, totaling nine for the year, compared to three in H1 2023.
Intra-sector acquisitions increased to 74% of total deals, up from 57% in Q1 2023. Despite rising market confidence and improved conditions, acquirers underperformed the market by 9.3 percentage points in Q2 2024.
North American and European acquirers struggled, underperforming regional indexes by 7.7% and 10.7%, respectively. In contrast, Asia Pacific outperformed its index by 1%.
Challenges include inflation, high interest rates, and political uncertainty, emphasizing the need for cautious dealmaking and thorough due diligence.
- Global M&A activity increased by 28% in Q2 2024 compared to Q2 2023.
- Nine mega deals over $10 billion completed in H1 2024, up from three in H1 2023.
- Intra-sector acquisitions rose to 74% of total deals, indicating market consolidation.
- Acquirers underperformed the market by –9.3 percentage points in Q2 2024.
- North American acquirers underperformed their regional index by –7.7%, marking the sixth consecutive quarter of underperformance.
- European acquirers underperformed their regional index by –10.7% in Q2 2024.
- Chinese M&A activity slumped to its lowest level since 2010, with just three deals in Q2 2024.
Insights
The data from WTW's Quarterly Deal Performance Monitor shows a notable increase in global M&A activity in the second quarter of 2024, with 166 deals valued over
However, despite the rising volume of deals, share price performance for acquirers has struggled, underperforming the market by
Investors should consider these regional disparities when evaluating potential M&A opportunities. The ongoing underperformance in North America and Europe may signal increased risk, while the relative stability and positive performance in the Asia Pacific region could make it a more attractive market for future investments.
The shift towards intra-sector acquisitions is an interesting trend, with such deals rising from
However, this trend also implies that many companies may be divesting non-core assets to streamline operations and focus on their primary markets. This could lead to increased opportunities for specialist buyers looking to acquire these non-core assets at potentially favorable valuations.
For retail investors, understanding the nature of these intra-sector deals is crucial. They can signify a company's strategic focus on strengthening its core operations, which could lead to improved profitability and stability in the long run.
NEW YORK, July 11, 2024 (GLOBE NEWSWIRE) -- Global mergers and acquisitions (M&A) activity maintains the positive momentum achieved at the start of 2024, with deals completed during the second quarter improving upon 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, the data reveal that 166 deals valued over
The 35 large deals (valued over
Acquisitions completed within the same industry sector (intra-sector deals) have been rising as a proportion of overall M&A, compared with cross-sector acquisitions. Since the start of 2023 intra-sector acquisitions have increased from
“If the first half of 2024 is any indication, dealmaking may be on the verge of returning to pre-COVID levels and deal behavior,” said David Dean, managing director, Mergers and Acquisitions, WTW. “The combination of rising market confidence, anticipated interest rate cuts, improved financing conditions, low volatility and narrowing valuation gaps will help shake off the dealmaking doldrums we’ve seen since late 2022.”
Compared with the strong equity market performance worldwide, which has made valuations more expensive, companies completing M&A deals have struggled to compete with the wider market,1 underperforming by –9.3 percentage points between April and June 2024. This figure is based on share price performance and continues the underperformance of acquirers from the previous quarter (–13.1 percentage points).
Despite these latest performance figures, the long-term 15-plus-year trend still shows that acquirers have outperformed the market since the global financial crisis, by +1.4 percentage points.
The M&A market in North America remains challenging. Acquirers underperformed their regional index by –
European dealmakers also struggled to generate value from transactions. Having last outperformed their regional index in 2021, they underperformed once more during the period April to June 2024 by –10.7 percentage points with 34 deals completed, down from 37 deals closed in the first quarter of 2024.
The M&A data show that once again the Asia Pacific market fared better, continuing to be the only region to outperform its regional index. For 10 out of the previous 11 quarters, buyers in the region have outclassed their index in terms of share price performance, most recently by +1 percentage points in the second quarter of 2024, with 38 deals closed. This also represents an increase of seven deals compared with the previous three months.
Notably, the number of deals completed in China — the world’s second largest economy — slumped to just three transactions during the second quarter of 2024. When combined with the nine deals closed in the first three months, this is the country’s lowest level of M&A activity for the first six months of a year since 2010.
“While deal volume is up this year, lingering inflation, high interest rates and uncertainty surrounding the upcoming presidential election still pose risks for future M&A activity. If an M&A rebound is to take shape, we believe dealmakers will need to lower their risk exposure by exercising a high degree of caution, focus on ‘best-fit’ deals and thorough due diligence that allows for extended timelines, coupled with an effective integration plan that maximizes M&A value,” 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 than50% 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 LSEG (formerly 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 Contacts
Ed Emerman: +1 609 240 2677
eemerman@eaglepr.com
1 The M&A research tracks the number of completed deals over
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