The M&A research, run in partnership with Cass Business School, tracks the number of completed deals over $100m and the share price performance of the acquiring company against the MSCI World Index[1]. The findings revealed that over a one-year rolling period acquirers have underperformed the Index by 2.8pp (percentage points).
Jana Mercereau, Head of Corporate Mergers and Acquisitions for Great Britain, said: “We have seen clear warning signs of market stress during 2018 such as rising US interest rates; geopolitical, trade and tariff uncertainties; overstretched M&A valuation levels; and increasing protectionism against cross-border M&A deals and global trade flows. Taken together, the impact on deal performance is perhaps understandable.”
Asia-Pacific acquirers have shown the worst annual performance of all regions with an underperformance of 18.3pp below the regional MSCI Index, followed by an underperformance by North American acquirers of 3.5pp below their regional index. Europe was the only region to see its acquiring companies outperform their regional Index over the course of 2018, by 3.6pp, and this came despite an underperforming fourth quarter led by poor performance from UK acquirers.
Additional findings revealed by the study include:
In the final quarter of 2018, deals valued from $100 million to over $10 billion significantly underperformed the Global Index by an average of 3.5pp.
Reflecting the uncertain global economic outlook, the fourth quarter saw just 208 deals[2] closed, which is the lowest final quarter figure in the last six years. This is principally due to the decline in the number of Asian deals.
The number of mega deals closed in Q4 2018 is currently at seven, the highest quarterly figure for this year and not seen since 2016. Year-to-date, there have been 15 mega deals which have underperformed the market by 13.3pp, the worst performance of all deal types.
Firms acquiring High Tech, Healthcare and (to a lesser extent) Retail were the only ones to outperform the industry indices in 2018. High Tech was also the most targeted industry group with 143 deals involving tech firms being bought in 2018 (YTD).
UK acquirers are currently at 5pp below the index with eight deals in Q4 2018, although they have consistently outperformed their regional index in the last three years (3.6pp) and in the last year (0.5pp).
“The short-term outlook for M&A activity appears challenging, with intensifying trade wars, ongoing uncertainty around Brexit and shareholder activism on the rise causing some dealmakers to hit the pause button,” said Jana Mercereau. “However, the recent slowdown is likely to be temporary, with confidence amongst buyers remaining positive. For those companies that do decide to make a deal in 2019, scrutinising recent value killers and assessing how existing processes lead to value loss will prove crucial first steps towards improving strategy, sidestepping future pitfalls and successfully implementing deals.”
|
