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M&As Expected to Bounce Back in 2019


The global mergers and acquisitions market has struggled to add value and buyer performance has been in steady decline since a 2015 peak.

That’s the conclusion of long-term data compiled and analyzed by Willis Towers Watson and the University of London’s Cass Business School.

After 2018 saw deal makers underperform in terms of shareholder value for an unprecedented fifth consecutive quarter and record their worst annual performance for a decade, what can potential acquirers expect in 2019?

“The ability to deliver anticipated benefits in terms of shareholder value for the buyer is at a 10-year low,” said Jana Mercereau, Willis Towers Watson head of corporate mergers and acquisitions for Great Britain. “On top of this, the market stress that characterized 2018 will persist, with rising regulatory uncertainty, ongoing trade and tariff negotiations, including Brexit talks and the U.S.-China trade disputes, making it ever more challenging to deliver deals successfully.”

Based on short- and long-term trends revealed by the data, as well as conversations with clients and colleagues, Mercereau offers five M&A predictions for 2019:

  • Things can only get better in 2019. “2018 was a tough year for deal makers, who recorded their worst annual performance since the financial crash in 2008. Although complex headwinds remain, we are optimistic that the market will bottom out in 2019 and, supported by more clarity over the direction of the U.S. administration and Brexit, improve the position of buyers in achieving better value from their deals.”
  • Fall in foreign deals. “We expect to see a global decline in the number of cross-border deals due to regulatory constraints fueled by an increasing trend towards protectionism. This will lead to a more defensive strategy of domestic consolidation, for which some nations will be better equipped. The U.S. domestic M&A market, for example, has traditionally shown itself to be very robust, so we expect volumes to remain stable as acquirers focus their firepower on domestic targets.” 
  • No uptick expected in Asia-Pacific (APAC). “As well as a significant drop in deal volume, Asia-Pacific acquirers recorded the worst annual performance of all regions in 2018, with an underperformance of 17.1pp (percentage points) below the regional MSCI Index. We expect M&A activity from Chinese companies to be muted in 2019, impacting volumes across the Asia-Pacific region.”
  • Outside interest in the UK remains strong. “While ongoing uncertainty around Brexit is likely to translate into less M&A activity for UK companies in 2019, the positive results enjoyed by non-UK acquirers when buying in the UK will see Britain remain one of the most popular M&A target nations.”
  • Mega deals continue to struggle. “There were 17 mega deals (more than $10 billion) in 2018, which underperformed the market by 14.5pp, the worst performance of all deal types. Global political uncertainty, from trade wars and growing protectionism to Brexit, will continue in 2019 and negatively impact mega deals in particular, as buyers will be cautious of transactions that take a long time to complete in a volatile deal making environment.”

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 which meet the study criteria are included in this research.
  • Deal data sourced from Refinitiv.

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