Global M&A Performance Roars Back in 2013

Acquirers around the world enjoyed their best performance this year since the financial crisis began in 2008, outperforming companies not involved in M&A activity by an average of 4.7%, according to Towers Watson’s Quarterly Deal Performance Monitor.

The study of completed M&A deals over $100 million, conducted in partnership with Cass Business School in London, shows that during 2013, North America acquirers outperformed those in other regions at 8.1% above the regional MSCI Index. This represented a significant turnaround from last year, when the region underperformed the index by 1.3%.

Acquiring companies in Asia Pacific outperformed the regional index by 3.5% (compared to a 0.1% underperformance in 2012), while performance in Europe came in at 2.2% above the regional index (compared to 2.4% in 2012).

“The big M&A story for 2013 is how well acquirers’ stock performed relative to that of non-acquirers across the three regions we track. And North America acquirers showed the most dramatic reversal, underperforming the index in 2012, then outperforming the index so strongly this year,” said Jim McKay, North America M&A practice leader at Towers Watson.

North America continues to lead the other regions in terms of the volume of deals completed, with 375 deals over $100 million so far in 2013. This accounts for nearly 60% of the global total. Asia Pacific has overtaken Europe as the second-most active M&A region, completing 141 deals to Europe’s 104. As a result, for the second year in a row, Europe had the lowest number of completed deals in 2013 and its lowest level since 2009.

The research also shows that in 2013, there were fewer megadeals (those over $10 billion) than in prior years. There were only four such deals in 2013, none of which occurred in the second half of the year. This marks the first time this has occurred for any six-month period in nearly three years.

The data also show that in 2013, slow deals (those taking over 70 days from announcement to completion) performed better than deals completed rapidly (7.0% versus 3.1%). In addition, domestic deals (where the acquirer and the target company are both based in the same country) outperformed cross-border deals by 5.2%.

“While many companies have cash to spend on acquisitions, and the economic outlook is improving for many countries, the research confirms that most companies are still taking a surprisingly restrained approach to M&A,” said McKay. “Such caution is understandable, but we do know from previous research that companies buying into a rising market tend to outperform their peers to a greater extent than those buying in a flat or declining market. So if the markets remain strong, those companies willing to be among the early movers in their industry are likely to see a clear advantage.”

USA, London and UK, London

UK private equity investment in the £10M-£10OM market grows by 44%

Data from the Lyceum Capital and Cass Business School UK Growth Buyout Dashboard shows that the UK has reinforced its position as the preeminent market for private equity investment in Europe, with activity in its lower mid-market having continued its strong recovery in 2011 to pre-recession levels of almost 100 deals.

Highlighting the segment’s robustness despite macro-economic challenges, the UK Growth Buyout Dashboard, revealed 44 per cent growth in the total number of transactions last year to 91, compared to 63 in 2010 and 34 deals in 2009.

The quarterly data, which analyses UK-headquartered private equity control deals in the £10 to £100 million enterprise value space, also shows that total deal value has more than trebled over the past three years, with aggregate values in excess of £3.4 billion last year compared to over £2.2 billion in 2010 and just above £1.0 billion in 2009.

Technology, media and telecommunications (TMT) was the stand-out sector – a trend which is likely to continue, driven by growth in innovative IT solutions such as cloud computing and mobile business applications. 26 TMT deals completed during 2011, contributing to 29 per cent of completed transactions, compared to 11 a year earlier and just four in 2009.

Click here to read the full UK Growth Buyout Dashboard.

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