A positive performance in the final three months of 2022 saw M&A deals outperform non-acquirers for a second consecutive quarter, according to research on completed deals from WTW’s Quarterly Deal Performance Monitor (QDPM).
Based on share price performance, WTW states that companies making M&A deals outperformed the wider market by +5.2pp for acquisitions valued over $100 million between October and December 2022. This follows a positive performance of +3.9pp in the previous quarter.
Full-year figures for 2022 still reveal a slight underperformance by buyers of -0.8pp compared to non-acquirers, despite the upturn in acquirer performance in the second half of the year.
This is in contrast to a positive full-year performance of +1.4pp in 2021.
In addition, compared to 2021, 2022 deal volume was down by 19%, with 853 deals completed globally. WTW attributes this drop to a marked slowdown in M&A activity in North America.
However, Jana Mercereau, Head of Corporate M&A Consulting, Great Britain at WTW, commented, “While geopolitical tensions, inflation and rising interest rates had an inevitable impact last year on deal activity and performance, the extraordinary pace set in 2021 was also unsustainable.
“Rather than being interpreted as a downward trend, current M&A volumes reflect a return to healthy pre-pandemic levels.
“Macroeconomic uncertainty will persist in 2023, yet deals will still get done. Despite the bar being raised on difficulty, the positive M&A performance sustained over the last two quarters clearly indicates the ability of strategic buyers to succeed in challenging environments.
“By looking at target companies with an even finer lens, investing more time and resources to ensure quality due diligence, dealmakers will be well-placed to generate value and drive longer-term growth from deals.”
As mentioned, North America led the slowdown in activity, with acquirers closing 402 deals in 2022, 35% fewer compared to the 614 deals completed in 2021.
In contrast, WTW states that deal volumes have been more stable in Europe and Asia Pacific, with both regions seeing a marginal increase in M&A activity during the last 12 months.
European acquirers completed 203 deals in 2022 compared to 199 in 2021, while 200 deals were completed by Asia Pacific dealmakers in 2022 compared to 196 the previous year.
On paper, Asia Pacific buyers outperformed their regional index by +10.1pp for 2022, though the full year figures show an annual underperformance across other regions, with North American and European buyers underperforming their industry peers by -1.9pp and -5.7pp, respectively.
Regarding the final three months of 2022, WTW states there was a stronger global performance not only by Asia Pacific dealmakers (+10.5pp) but also in North America where acquirers also strongly outperformed their regional index (+9.4pp).
Only dealmakers from Europe continued to underperform their index by -2.6pp during the final quarter of 2022.