M&A Study: Asia-Pacific, European Acquirers Outperform US Counterparts

Acquirers outperformed the Global MSCI Index in the third quarter of 2011, with Asia-Pacific and European acquirers sharing the top spot in the quarterly analysis performance league, according to latest figures from Towers Watson.


New data from the latest issue of the Quarterly Deal Performance Monitor (QDPM) for Q3 of 2011 shows that Asia-Pacific and European acquirers had outperforming share prices of 12.7 percentage points (‘pp’) and 4.8 pp above their respective regional MSCI indices.


North American acquirers underperformed in the third quarter of 2011, 2.1 pp below their regional index.


Year-to-date analysis of the research also reveals that acquirers from Asia-Pacific and Europe added more value to their shareholders with a performance of 5.7 pp and 5.6 pp above their respective regional indices compared to an outperformance of only 1.8 pp for North American acquirers.


Based on data to 15 September, Q3 2011 M&A activity (161 deals) - measured as all deals with a value of at least $100 million completed in the quarter - is comparable in number of deals to Q3 2010 (163 deals for the full quarter).


Overall trend of acquirers outperforming the Global MSCI index continues

The quarterly M&A research, commissioned by global professional services company Towers Watson and based on quarterly analysis begun in Q1 2008 by Cass Business School, shows that acquirers continued to outperform the Global MSCI Index in the third quarter of 2011, with an average adjusted return of 3.5 percentage points [pp], which is slightly below the trend of the most recent four quarters.


With the exception of two quarters in 2009, acquirers have consistently outperformed the Index for the last fifteen quarters.


The average performance from Q1 2008 to date is 3.5 pp above the Index, hence the performance in this quarter is at par with the long-term average. 

Acquisitions in some sectors perform better than others
Year-to-date analysis shows that Energy & Power and Materials are the best two performing sectors (of the nine sectors with data available) with an outperformance of 7.2 pp and 6.4 pp above their respective industry indices.


Large deals are harder to complete

Large deals are shown to be more difficult for acquirers to prove successful as reflected by the year-to-date figures. This analysis shows that acquirers who completed a deal with a transaction value of $1bn or higher underperformed the Index by 2.1pp over the year-to-date compared to an outperformance of 5.2 pp over the year-to-date above the Index for the remaining acquirers, i.e. those which completed significant acquisitions of less than $1bn in 2011. 


Quick deals pay off
On a year-to-date basis, the positive correlation between performance levels and ever-tightening timeframes in the commencing and execution of deals has also continued, with quick deals - those which completed equal to or below the average in the quarter - providing returns of 5.6 pp compared to 2.8 pp observed in slower deals.


“The outperformance of European and Asia-Pacific based acquirers is encouraging,” says Marco Kaster, M&A Advisory Leader for Asia Pacific, Towers Watson.


According to Kaster,  these regions typically see a greater proportion of cross-border and cross-regional deals taking place. 


He adds that these deals are typically harder to implement successfully not least because of the significant challenges in conducting robust due diligence in markets where the buyer may be less familiar and the difficulties of integrating workforces across different countries and regions with different working cultures.


“Increasingly we see acquirers recognising this and taking proactive steps to address these challenges in their deal preparation and due diligence process,” notes Kaster.


In spite of the uncertain economic climate, the study again shows that the most successful deals are those that are executed quickly.


“It would appear that the better deals are those that are completed more quickly. A longer completion timeframe for a deal is typically a reflection of greater challenges within the due diligence or deal negotiations. The markets are rewarding acquirers that are bold and complete their deals quickly,” concludes Kaster.






Suggested Articles

Some of you might have already been aware of the news that Questex—with the aim to focus on event business—will shut down permanently all media brands in Asia…

Some advice for transitioning into an advisory role

Global risks are intensifying but the collective will to tackle them appears to be lacking. Check out this report for areas of concern