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Dealmakers Beat the Market During Past 10 Years


Shareholders of companies involved in mergers and acquisitions (M&A) the past decade have reaped the benefits.

M&A deal-making has been delivered superior shareholder returns during the last decade, according to global data compiled by Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM). Based on share price performance, companies actively engaged in M&As valued at more than $100 million from 2008 to 2018 outperformed the market by an average of 3.1 percentage points (pp).

“Some business leaders argue that organic growth is better than buying growth, but the track record of the last decade should make companies question this conventional view,” said Jana Mercereau, senior director at Willis Towers Watson’s mergers and acquisitions team. “Our data shows that companies that were disciplined acquirers consistently outperformed those that stayed away from deals. M&A, in short, has been a successful strategy for profitable growth.”

The five biggest trends in the past ten years, according to the Willis Towers Watson global study in partnership with the London-based Cass Business School, have been:

  • Bigger is better. Mega deals, those valued at more than $10 billion, beat the index by 4.3pp, while large deals valued at more than $1 billion outperformed by 2.9pp. Medium deals ($100 million-$1billion) performed a marginal 0.1pp above the index.
  • The rise of China. Chinese M&A activity reached historic highs in the past decade and doubled its market share, rising from $24.9 billion or 3.5% of the global M&A market in 2008 to $57.5 billion or 7.2% in 2018. Despite government restrictions on capital outflows and rising protectionism, Chinese outbound investment is still expected to reach further highs during the next decade.
  • UK shrugs off Brexit. UK-headquartered firms have consistently beaten the European index by 3.7pp and have maintained this performance level despite the country’s looming departure from the European United. The United Kingdom also remains Europe’s investment destination of choice thanks to a number of factors including its skilled labor force, economic stability and market size.
  • Regional winners and losers. European dealmakers, as well as outperforming non-acquirers in their own region by 3.7pp, have been far more consistent than any other region, delivering on average a positive shareholder return in nine out of the past 10 years. In contrast, U.S.-based acquirers outperformed their regional index by 1.5pp. A 10-year rolling average performance of 8.3pp keeps Asia-Pacific companies in pole position, but roller-coaster swings in the region have seen acquirers failing to add value for the last seven quarters in a row.
  • Industry winners and losers. Compared to other industries, Telecoms and Technology companies completing M&A transactions performed the worst by actually destroying value during the past decade, with underperformances of 1.5pp and 0.5pp respectively. Acquirers in the Materials and Consumer Staples markets delivered the strongest returns of 5.6pp and 5.3pp during the same period.

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 in which the deal is completed.
  • 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.
  • Deal data sourced from Thomson Reuters.

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