AMSTERDAM, January 5, 2022 — Global dealmakers achieved their first positive M&A performance for a full year in 2021 since 2016, according to latest research on completed deals from Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM). Based on share-price performance, companies making M&A deals outperformed the World Index1 by +1.4pp (percentage points) on average.
Run in partnership with the M&A Research Centre at The Bayes Business School (formerly Cass), the data also reveals that global activity breached new highs as completed deals valued over $100 million reached 1047 in 2021. This represents a significant increase on the previous year (674) and is the highest annual volume since our analysis began in 2008.
Deal volume in North America remained consistently strong during 2021, with acquirers closing 614 deals, almost double the 325 deals achieved in the previous 12 months, although they only outperformed their regional index by the narrowest of margins (+0.5pp).
For the full year, APAC dealmakers recorded their strongest performance since 2016, outperforming their index by +16.8pp, despite closing only fractionally more deals regionally compared to 2020 (196 vs 173), as fewer Chinese acquisitions continued to depress volume levels. European acquirers outperformed their regional index, showing a positive performance of +3.9pp and 199 deals closed in 2021, up a quarter on 155 deals in the prior 12 months. UK acquirers have consistently outperformed the FTSE All-Share index over the last five years, recording a positive performance of +5.7pp for the year.
Gabe Langerak, Head of M&A Consulting for Western Europe at Willis Towers Watson, said: “The M&A boom in 2021 looks set to continue, fuelled by abundant investment capital, strong equity markets and cheap debt, and companies under pressure to make their businesses greener by hunting for targets with the right climate credentials. M&A data coming out of North America also highlights the impact that historically high asset valuations, pushed up by competition and increasing complexity, can have on deal performance. The question is whether prices being paid now will continue to make sense over time.”
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Annual Performance (pp) * | 2.7 | -0.7 | +4.5 | +5.5 | +10.1 | +5.4 | -1.3 | -3.0 | -5.0 | -1.9 | +1.4 |
Gabe Langerak shares his top trends for the year ahead:
01
ESG (environmental, social and governance) priorities are climbing to the top of CEO agendas, with greater emphasis to drive employee engagement in a hybrid world of work and purchasing, rationalising or divesting assets to improve their environmental footprint. Themes such as decarbonisation will drive deals and there will also be opportunities for new ventures stemming from climate risk mitigation innovation.
02
Businesses have been focusing on the digital transformation of their operations for several years, with the pandemic increasing the speed and scale of change.
The so-called Great Resignation, which has forced companies to re-evaluate how to retain and acquire new talent in a scarce labour market, will continue to be a factor with companies under pressure to acquire high-end talent in fields such as cyber security and software engineering. Our M&A data reveals that 293 large and mega deals (those valued at over $1bn) were completed in 2021, the highest number recorded as companies shaped their post-COVID future through transformative acquisitions. This may well be surpassed in 2022 as companies and investors flush with cash continue to look for acquisitions in areas where they need to grow or add capabilities.
03
Many companies will aim to achieve more self-sufficiency in their products and services due to the immense strain exerted on global supply chains by the pandemic, social unrest, cyber-attacks, and extreme weather events. They will achieve this through either reshoring, nearshoring or M&A by vertically integrating upstream links to improve certainty of delivery.
04
Instead of declining in line with economic downturns, the unprecedented amount and mix of capital for deals from private equity firms and other investors indicates an increased capability and desire to do deals through downturns. The rising trend to build professional in-house corporate development teams, allowing firms to identify and act on opportunities more nimbly themselves, will further enhance acquirers’ capacity to undertake M&A deals even during high volatility.
05
Most dealmakers will be aiming this year to match or exceed their 2021 deal total, but they will also be concerned that inflation pressures and ESG issues could have a negative impact on deal performance.
Besides the ongoing pandemic, supply chain disruptions and talent shortages, government regulation is likely to intensify, with a focus on the technology sector. Companies will also continue to face geopolitical tensions. China looks unlikely to remain the powerhouse of international, cross-border deals, which may serve to stimulate activity in other places such as Japan, India and Southeast Asia. This trend is already evident in our data, which reveals cross border M&A activity during 2021 has remained at a steady level despite depressed deal activity from China.
Langerak said: “M&A activity in 2022 looks poised to match the peaks of 2015, although deals will remain susceptible to increasing challenges. High valuations, deal complexity, competition for high-quality assets and pandemic-fuelled supply chain disruption will continue to have knock-on consequences for dealmakers. Deal speed, preparation and quality due diligence will be essential if dealmakers’ expectations are to be met.”
“Deals remain susceptible to increasing challenges. Deal speed, preparation and quality due diligence will be essential if expectations are to be met.”
Gabe Langerak | Head of M&A Consulting Western Europe, Willis Towers Watson
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.
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, optimise 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.
1 The M&A research tracks the number of completed deals over $100m and the share price performance of the acquiring company against the MSCI World Index, which is used as default, unless stated otherwise.
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