Global merger and acquisition (M&A) activity fell to its lowest level last year since the financial crisis, but a surge in the final quarter is expected to continue in 2021, according to new data from Willis Towers Watson (WTW).
The research in partnership with the M&A Research Centre at The Business School, formerly Cass, reveals that Covid-19 dragged M&A activity in 2020 to its lowest level for years.
Companies worldwide completed just 674 deals valued at more than $100m. This is significantly less than 774 in the previous year and the lowest annual volume since 332 were record in 2009, according to WTW’s Quarterly Deal Performance Monitor (QDPM).
But the QDPM shows a sharp rise in M&A volume during the final quarter with 246 deals completed worldwide, compared to 210 in Q4 2019. There were 61 large deals valued between $1bn and $10bn, which is the highest ever recorded during a final quarter.
This Q4 resurgence was driven by a strong uptick in North America, which saw a record 136 deals for a final quarter.
WTW said that despite the uncertain economic outlook, conditions are primed for a global “dealmaking surge” in 2021.
Jana Mercereau, head of corporate M&A consulting, Great Britain at WTW, said: “The year 2020 has been unlike anything we’ve ever seen, fuelled by an enduring pandemic, massive economic uncertainty, a highly divisive US presidential election and rising geopolitical tensions. While the world in 2021 remains a volatile place, pent-up demand, ample funding, ultra-low interest rates and confidence returning to boardrooms indicate conditions are ripe for one of the biggest M&A years on record.
“That said, dealmakers should not assume a corner has been turned, with uncertainty set to remain. It will be as critical as ever for acquirers to pick their targets carefully for growth before jumping into a deal, if they are to give themselves the best chance of success. A dedicated focus on HR and people-related risks during due diligence and integration can help achieve this,” she added.
WTW’s monitor also shows that acquirers worldwide have now, on average, failed to add value from transactions for four consecutive years, based on share-price performance. They underperformed the global index by 1.9 percentage points during the past year. But this is an improvement on underperformance of five and three percentage points in 2019 and 2018 respectively.
European buyers, meanwhile, outperformed their regional index by 12.2 percentage points in 2020 and by 5.3 percentage points in Q4.
UK acquirers beat the European Index by 4.1 percentage points for the full year.