Willis Towers Watson Public : Global M&A performance enjoys bounce back in third quarter

ARLINGTON, VA, October 4, 2022 - Global mergers and acquisitions (M&A) performance bounced back in the third quarter of this year, according to research on completed deals from the Quarterly Deal Performance Monitor (QDPM). Based on share price performance, buyers outclassed the wider market by +3.9 percentage points for deals valued over $100 million between July and September 2022.¹ WTW (NASDAQ: WTW) is a leading global advisory, broking and solutions company.

Run in partnership with the M&A Research Centre at Bayes Business School, the data also reveal the extent to which risk sentiment has cooled. Global deal activity is significantly down, with 210 deals completed in the third quarter of 2022 compared with 264 in the same quarter of 2021; however, this indicates a return to healthy pre-pandemic levels after the record-setting pace of 2021 driven by exceptional conditions.

For the first time since the second quarter of 2019, no mega deals (valued over $10 billion) were closed in the past quarter. Large deals (valued over $1 billion) were also significantly down compared with the same period in 2021 (49 versus 67). This decline in larger deal activity suggests acquirers are growing more cautious by avoiding the risks that come with more complex deals as well as spending more time on their due diligence processes in response to increasing regulatory scrutiny in several key markets.

Despite the perfect storm of challenges facing the market - rising interest rates, higher inflation, geopolitical tensions and a looming recession - that has clearly weighed on deal maker sentiment, M&A is showing significant resilience.

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Markets have seen a 'flight to quality' as investors avoid high-yield and exotic assets, instead focusing on more stable and defensive businesses of sufficient quality to mitigate the short-term market concerns,"

Duncan Smithson| senior director, Mergers and Acquisitions, WTW.

"M&A activity is likely to continue with a more cautious tone as we head toward the end of the year. The flight to quality reinforces the need for companies to set their sights on assets with a clear, well-articulated strategic rationale. Assets perceived as being 'just okay' are unlikely to transact in this lower-risk environment," said Smithson.

Overall, only European acquirers underperformed their regional index. Asia Pacific acquirers outperformed by +14.4 percentage points, with 49 deals closed in the third quarter of 2022. North American acquirers also outperformed their index by +4.5 percentage points, with 98 deals closed between July and September. Dealmakers from Europe, who have been most disrupted by geopolitical and global financial uncertainty, underperformed their index by -6.7 percentage points, with 51 deals completed.

"For the first time in a generation, we are faced with a volatile cocktail of surging inflation and rising interest rates, combined with increased regulatory intervention, applying further pressure to an already fragile global economy. Despite these major geopolitical and financial headwinds, and the potential for further shocks still to come, M&A is continuing apace.

"Even though financial conditions have tightened sharply through the first nine months of 2022, plenty of dry powder is still available, with some investors seeing current conditions as a buying opportunity and private equity firms needing to deploy large amounts of cash by year-end. We expect competition for much-needed technology, ESG [environmental, social and governance] priorities, supply chain resilience and recession-proof industry deals to drive dealmaking into 2023 as companies navigate current market uncertanties and plan for long-term growth," concluded Smithson.

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.

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.