ARLINGTON, VA, July 7, 2020 — The impact of the COVID-19 pandemic on deal making in the first six months of 2020 was significant but not unexpected, yet regional differences in deal performance and volume revealed by M&A data1 from Willis Towers Watson (NASDAQ: WLTW) have been more dramatic.
Based on share price performance, the latest results from leading global advisory, broking and solutions company Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM), run in partnership with Cass Business School, show North America experienced the sharpest fall in M&A performance by some margin. Acquirers underperformed their regional index by –7.2 percentage points with just 137 deals completed in the first half of 2020 (compared with 188 in the first half of 2019). This is the lowest number of North American deals for a six-month period since 2009.
In contrast, European buyers performed +10.2 percentage points above their regional index in the first half of 2020 based on an actual increase in deals completed (80 deals compared with 68 deals in the first half of 2019). This is also the first time in two years that Europe has recorded three consecutive quarters of positive performance. Meanwhile, U.K. acquirers performed +16.9 percentage points above the index with 15 deals in the first half of this year.
“Economic uncertainty caused by the pandemic seems to have had a far greater negative impact on the ability of U.S. companies to initiate and successfully complete M&A negotiations”
David Hunt,
senior director, Human Capital and Benefits, M&A
Asia Pacific deal makers also fared better compared with their regional index in the first half of 2020, albeit with a more modest positive performance of +3.1 percentage points and based on a slight dip in volume (82 deals compared with 95 completed in the first half of 2019). Perhaps more significantly, the region’s outperformance in the past three months improved substantially at +8.0 percentage points based on 41 deals closed, the region’s first significant positive quarterly performance since late 2016.
“Global M&A activity tumbled to its lowest level in more than a decade in the wake of the COVID-19 outbreak, with most of this decline driven by North America. Economic uncertainty caused by the pandemic seems to have had a far greater negative impact on the ability of U.S. companies to initiate and successfully complete M&A negotiations,” said David Hunt, senior director, Human Capital and Benefits, M&A.
Additional findings from the QDPM data include:
“Before the severe disruption of COVID-19, deal makers already faced uncertainty, including trade disputes, the threat of global recession, the rise of shareholder activism and a U.S. presidential election on the horizon, making the deal performance and volume in some markets even more impressive,” said Hunt. “While it’s not possible to forecast the pandemic’s long-term impact on M&A, more turbulence seems inevitable.
“What previous crises do tell us is there will be opportunities to make deals, underpinned by vast amounts of capital still waiting to be deployed. Activity, partly driven by distressed M&A and non-core divestitures at bargain prices, will become more selective, deals will take longer, and acquirers will need to be prepared for the duration and depth of their due diligence to increase, even as COVID-19 subsides,” concluded Hunt.
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 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, optimize 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 $100 million and the share price performance of the acquiring company against the MSCI World Index, which is used as default, unless stated otherwise.
