Re/insurance broker Willis Towers Watson (WTW) expects global merger and acquisition (M&A) activity to remain strong in 2022 after a record number of deals completed with a value of more than $100 million last year.
The latest research from WTW’s Quarterly Deal Performance Monitor, run in partnership with the M&A Research Centre at The Bayes Business School, reveals that dealmakers achieved their first positive M&A performance for a full year in 2021 since 2016.
The data also shows that global activity reached new heights as completed deals valued above $100 million reached 1,047 in 2021, which is up drastically on the 674 seen in 2020 and is the highest annual volume since WTW’s analysis began in 2008.
Based on share-price performance, firms making M&A deals outperformed the World Index by an average of +1.4 percentage points. This compares with an average of -1.9pp in 2020, and -5.0pp in 2019.
“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,” said Jana Mercereau, Head of Corporate M&A Consulting, Great Britain, WTW.
In North America, deal volume remained consistently solid throughout the year, with acquirers closing 614 deals, which is almost double the amount seen in 2020.
“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,” added Mercereau.
Asia Pacific deal makers recorded their strongest performance for five years, reports WTW, outperforming their index by +16.8pp, and this is in spite of completing fractionally more deals regionally compared to the previous year as a result of fewer Chinese transactions depressing levels.
In Europe, acquirers also outperformed their regional index, reporting a positive performance of +3.9pp as 199 deals completed in 2021, compared with 155 deals in 2020.
Looking forward to the year ahead, and WTW expects ESG goals to contribute to an M&A boom. Additionally, the broker expects M&A to be fuelled by the acceleration of digital transformation efforts and supply chain issues.
“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,” said Mercereau.