Acquirers in 2013 recorded their best performance in six years, with share prices out-performing non-acquiring companies by an average of 4.5 percentage points (pp). However, despite the traditional end-of-year surge in completed deals in the last two weeks of the year, the total number of completed M&A deals in 2013 was lower, in each region, than total 2012 volumes, according to Towers Watson’s Quarterly Deal Performance Monitor (QDPM) in partnership with Cass Business School.
The strong performance of last year’s acquirers and the significantly improved economic outlook in many countries is likely to tempt more companies into the realms of a ‘mega-merger’ in 2014. Completion of large transformational deals worth over $10 billion was notably rare in 2013 but could become popular again as major companies look to expand into new business areas with big brave acquisitions.
“In 2012 the end-of-year M&A surge, caused in part by the US fiscal cliff, did not provide any momentum or presage increased M&A activity," says Steve Allan, Towers Watson’s M&A practice lead in EMEA. "This year however, with recovering economies and the growing confidence visible in the markets, we are expecting to see more M&A activity in 2014. In North America, completed deal numbers picked up steadily throughout the year, pointing to growing confidence, and we anticipate that North America will continue to lead the way in M&A in the coming year.”
This year Chinese companies are likely to break the Asia-Pacific mould of focusing on internal deals and increase the proportion of outbound deals (targeting companies outside the region) as European and North American targets become more tempting.
Deal volumes in North America increased in every quarter of 2013 illustrating the growing confidence of deal-makers. This is likely to continue into 2014 and may set a new record for the number of M&A deals completed in the region.
Europe, led by the UK, is likely to experience a small recovery in completed M&A deals in 2014 as economic confidence returns to the markets. Although this is unlikely to be enough to make up ground on the number of deals completed in Asia-Pacific and North America.