Global M&A activity tumbles to lowest level, North American deals at rock bottom: WTW

Global mergers and acquisitions (M&A) deal volumes tumbled to their lowest level for more than a decade in the third quarter of 2020 fuelled by the economic impact and uncertainty caused by the COVID-19 pandemic, according to Willis Towers Watson's latest report.

Only 121 deals have been completed globally in the last three months, with North America witnessing the sharpest decline and the lowest number of deals during the period.

According to the report, acquirers in North America underperformed their regional index by -8.6 percentage points with just 52 deals completed in the third quarter of 2020 - the joint lowest number of deals since 2009.

In contrast, European acquirers showed resilience with +20.4 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.

Asia Pacific dealmakers also continued the positive performance recorded in the first half of 2020 by outperforming its index with a performance of +4.4 percentage points, with 35 deals closed in Q3 2020. For the first time since 2017, Asia Pacific acquirers achieved two consecutive quarters of outperformance.

WTW report noted that the global M&A market recorded its first positive performance in three years for completed deals, despite the impact of the COVID-19 pandemic on dealmaking during 2020.

Based on share price performance, the latest results show that buyers outperformed the MSCI World Index in the third quarter of 2020, with a performance of +1.5 percentage points above the Index. This marks the first positive performance by acquirers since the third quarter of 2017 (+0.7 percentage points).

However, it noted that 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 at Willis Towers Watson. "Our research on completed deals and their performance provokes a more cautious response. 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.”

Mercereau added: “COVID-19 was a massive shock hitting economies and stock markets globally, yet instead of collapsing, M&A deals continue to defy gravity. 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.”