Asia Opens up Widest Margin Over Europe for M&A Deals

In 2012 Asia-Pacific acquirers completed nearly 40 percent more M&A deals than their European counterparts, according to Towers Watson’s Quarterly Deal Performance Monitor, the largest margin since the research began in 2008.

 

Companies in the region completed more M&A deals than Europe in a calendar year first in 2009, by a margin of 25 percent.

 

The research, run in partnership with Cass Business School, shows that Asia-Pacific dealmakers completed 161 deals in 2012 compared to 116 by their European counterparts and similarly completed more deals in every quarter of the year.

 

The year-to-date figures, which contains data on all deals over $100 million completed in the year, show North American companies accounted for 383 deals, well over half of those completed worldwide this year.

 

In terms of performance, Asia-Pacific companies that completed M&A deals outperformed their MSCI index by 3.0 percentage points over the year.

 

Despite an increase in activity by North American acquirers relative to their peers, year-to-date figures show post-deal performance of 1.3 pp below the North American MSCI index.

 

In comparison, European acquirers continued to fare well with a positive performance of 3.7 pp above the European MSCI Index, even though the volume of deals completed was at its lowest level since 2009.

 

“Asia-Pacific has been the most consistent region this year in terms of performance and its steady increasing deal volume and its usurping of Europe also reflects a steady decline in the number deals taking place there," says Steve Allan, M&A Practice Leader for Europe at Towers Watson.

 

Allan says uncertainty and poor performance in the Eurozone have contributed to European acquirers having engaged in fewer deals since their peak in mid-2011. Yet those companies that have seen deals through to completion continue to perform well compared to their peers and add value for shareholders.

 

In stark contrast, the volume of activity in the North American market belies the negative returns for acquirers.

 

"It will be interesting to see how these deal volumes develop in 2013 and whether Asia can confirm its position as the second largest M&A market, building on its growing M&A experience and best-practice expertise,” notes Allan.

The research shows the fourth quarter was the busiest of the year, with 190 deals taking place over the $100 million mark; the highest level since the equivalent quarter in 2011.

 

Of the sectors analysed, financial services continues to record strong year-to-date returns, 5.7 pp above the MSCI industry index while high-tech was the lowest performing with a return of 4.9 below the index.

 

Deals in the consumer products and services sectors showed strong positive performance with returns 4.9 pp above the MSCI industry index.

 

“The increase in volumes in the fourth quarter could well be an indication of activity beginning to return to the M&A market. If current impediments to business confidence can be resolved, then this uptick may become more pronounced in 2013,” adds Allan.

 

Allan further notes the continued success of the financial sector is no great surprise, with outperformance being fuelled primarily through the sale of distressed assets that have a lot of upside potential.

 

High-tech has shown itself to be difficult territory for acquirers to provide positive results, with the complexity of the companies involved - and the deal structures - proving to be a difficult barrier to overcome.

 

Additional research produced by Towers Watson and mergermarket found that M&A activity in Asia Pacific has not been dampened by the global economic downturn.

 

According to a report entitled Globalising Asia Pacific: Maximising the Value of Human Capital in Outbound M&A, for the first time 2012 saw more Asian companies buying outside the region (‘outbound’ deals) than outside companies buying into the Asia-Pacific region (‘inbound’ deals).

 

In 2010, outbound M&A accounted for roughly 40% of cross-border M&A activity in Asia Pacific, but by the first half of 2012, it had already accounted for more than 50%.

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