Despite Market Noise, M&A Deals Tread Water at Start of 2013

The number of M&A deals completed in the first quarter of 2013 fell significantly compared to the record levels seen at the end of 2012, according to data in the latest edition of Towers Watson’s Quarterly Deal Performance Monitor (QDPM). The research, run in partnership with Cass Business School, shows that the volume of deals completed globally fell by 33% this quarter to just 180, compared to the record 268 completions witnessed in the final quarter of 2012.

 

“As predicted last quarter, the surge of activity late in 2012 has proved to be more representative of a short-term spike than a long-term upward trend in the market. This may well have been triggered by a desire to close deals ahead of changes to US tax structures and to avoid the need to complete during an uncertain New Year period,” commented Steve Allan, M&A Practice Leader (EMEA) at Towers Watson. “There is a lot of noise around deal announcements at the moment, however we are not yet seeing any sustained uptick in completed deals. The number of completed deals across the quarter is distinctly average and not what could be considered representative of a buoyant and expanding market.  In reality we’re witnessing a ‘tread water’ M&A market in most geographies.”

 

Despite this, acquirers executing deals in the quarter were able to outperform their relative indices by 3.7 percentage points (pp), the highest outperformance seen since Q2 2011. Of the three regions analysed, North American acquirers fared best, outperforming their regional index by 6.7pp; the highest quarterly performance recorded since the study began in January 2008. In contrast, their peers in Europe underperformed their regional index by 6.1pp whilst acquirers from Asia-Pacific performed at 3.8 above their regional index.

 

“Having avoided the much-discussed fiscal cliff crisis, US acquirers have significantly outperformed their peers at the start of the year, reinforcing our long-held view that following a deal through to completion will add value, even in a market with thin volumes. As predicted in our outlook for 2013, European volumes have remained particularly low and we don’t see a discernible improvement materialising in the next few quarters,” says Allan.

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