New data from re/insurance broker Willis Towers Watson (WTW) shows that the global mergers and acquisitions (M&A) insurance market recorded its first positive performance in three years for completed deals.
The market performed well despite the impact of the COVID-19 pandemic on deal-making during 2020, but WTW says that its data does demand some caution.
Based on share price performance, WTW’s Quarterly Deal Performance Monitor (QDPM) shows that buyers outperformed the MSCI World Index in the third quarter of 2020.
Results were +1.5 percentage points above the Index, marking the first positive performance by acquirers since 2017, when results where at +0.7 percentage points.
However, analysts note that deal volumes are at their lowest level for over a decade (since Q3 2009), with just 121 deals completed in the last three months.
According to WTW, the ongoing economic impact and uncertainty caused by the pandemic have continued to depress deal completions globally.
“It is too early to interpret the flurry of announced deals in recent months as a sign that M&A is on the rebound,” said Jana Mercereau, Head of Corporate M&A Consulting, Great Britain at WTW.
“Our research on completed deals and their performance provokes a more cautious response,” Mercereau added.
“With the volume of completed deals at its lowest in a decade, performance of North American deals at rock bottom, fuelled by enduring pandemic, economic and political uncertainty, buyers need to be both bold and careful.”
Among the key findings of the QDPM data was the continued resilience of European acquirers, who remain +20.44 percentage points above their regional index with 30 deals closing in Q3.
This is the first time in two years that Europe has recorded four consecutive quarters of positive performance.
In contrast, deal-makers in North America had their worst quarterly performance since the QDPM Index launched in 2008, underperforming their regional index by -8.6 percentage points.
Asia-Pacific, meanwhile, continued its positive performance from H1 2020, outperforming its index +4.4 percentage points.
“COVID-19 was a massive shock hitting economies and stock markets globally, yet instead of collapsing, M&A deals continue to defy gravity,” Mercereau continued.
“Compared with previous economic cycles, the amount and diversity of capital available for M&A is extraordinary, assisted by historically low interest rates. Buyers who act decisively and with robust due diligence to exploit opportunities during this period of uncertainty could see higher returns than their industry peers and drive long-term growth.”