Global mergers-and-acquisitions activity is staging a revival — of sorts — as 2023 progresses, with the prevalence of deals worth more than $100 million on the rise, according to an analysis released by Willis Towers Watson.
While 130 such transactions were completed in this year’s first quarter, that number climbed to 150 and 151 in the two most recent quarters. The trend is seen worldwide, and additional gains in the volume of M&A deals are expected in the fourth quarter.
“While it’s too early to call a comeback, the recent rebound in deal volume across regions indicates pent-up demand, with M&A activity anticipated to improve as dealmakers enter the final and busiest quarter of the year,” said David Dean, managing director of M&A for Willis Towers Watson.
However, that encouraging economic news doesn’t do much to disguise the reality that, overall, 2023 continues to be a sluggish year for M&A.
First, the uptick was modest. Until this 2023, quarterly deal volume had been greater than 200 every quarter since the fourth quarter of 2020.
Second, the number of large deals — those valued at more than $1 billion — was down sharply from recent historical norms. Only 32 such transactions were completed from July through September, compared with 50 last year and 67 in 2021.
Factors Willis Towers Watson cited for the overall slow M&A arena this year included rising interest rates, translating to higher financing costs; increased antitrust scrutiny; and lenders exercising greater caution.
Historically Poor Performance
Third, even though deal volume was up in the third quarter, there was a disturbing slide in deal performance, defined as the change in share price from six months prior to deal announcement date to the end of the quarter in which a deal was completed.
Buyers that completed deals in the third quarter underperformed the wider equity market by 8.7 percentage points — the worst quarter performance since Willis Towers Watson began tracking this quarterly data in 2008.
“There is almost no margin of error in M&A deals today,” said Dean. “With M&A activity widely expected to pick up pace, companies need to be ready to identify the right targets and how they fit in their businesses, navigate accelerated due diligence processes driven by aggressive timelines, and above all, ensure the right people are integrated to maximize M&A value.”
Data show that Asia Pacific continues to be the only region to outperform its regional equity market index, having just recorded its ninth straight positive quarterly performance. Among industry sectors worldwide, technology and financial services performed particularly poorly.
The Willis Towers Watson study was performed in partnership with the M&A Research Centre at the Bayes Business School, City University of London, using deal data from Refinitiv.