High-performing M&A boom surges on

The global M&A blizzard continues and is yet to peak according to the latest Towers Watson’s Quarterly Deal Performance Monitor. While the overall volume of mergers and acquisitions[1] remains high in the second quarter of 2015, enthusiasm for large (over $1 billion) and mega deals (over $10 billion) is particularly strong for the third consecutive quarter, with 48 and 4 completions respectively in the second quarter of 2015, against 37 and 0 for the corresponding period in 2014.

The research – run in partnership with Cass Business School – also reveals that acquirers achieved an excellent financial performance this quarter continuing the unbroken run of ten consecutive quarters of outperformance, which saw deal-makers returning a median market[2] outperformance of 6.2 percentage points (pp); almost double that of the prior quarter.

Steve Allan, M&A Practice Leader (EMEA) at Towers Watson, said: “As the merger-wave that began a year ago continues unabated, deal-makers are now operating under a seemingly ‘buy big or go home’ mentality, which carries higher risks but also potentially more substantial returns, judging by recent performance figures.

“An unintended consequence of the trend towards larger deals is, that due to their greater complexities, deals are taking longer. Evidence of this is an increase this quarter of ‘slow’ deals; those taking 70 or more days to complete. Our research focuses wholly on completed deals, so we anticipate a very active third quarter this year when the unusually large number of deals announced in April and May should reach fruition.”

Geographically, the picture this quarter is relatively unchanged. From a volume perspective, North America continues to lead the pack with 93 completed deals, followed by Asia-Pacific with 58 deals and Europe with 34. Meanwhile, Asia-Pacific maintains a stunning outperformance for another quarter at 19pp above the regional index. This contrasts with a 3.2pp outperformance by North American acquirers and a return to positive performance of 0.2pp for European acquirers, above their respective regional indices.

Steve Allan adds: “This has been an interesting period for M&A from a number of angles. We will continue to monitor closely for signs of a climax to the current boom time. More specifically, and as predicted, the financial sector remains one to watch and is now showing early signs of a comeback in volumes this quarter.”