A Big Drop
Willis Towers Watson: North America hit by slowing mergers and acquisition deals amid COVID-19 disruption.
- David Pilla
- August 2020
Mergers and acquisitions volume in North America fell to its lowest level in more than a decade over the first half of 2020, dragged down by the COVID-19 pandemic, said Willis Towers Watson.
Europe and Asia-Pacific escaped the worst of the virus-related slump, the broker said in a statement on the release of its Quarterly Deal Performance Monitor.
WTW said the COVID-19 impact on M&A performance and volume in the first half of 2020 “was significant but not unexpected,” but the broker said regional differences in deal performance and volume from its M&A data “have been more dramatic.”
“Economic uncertainty caused by the pandemic seems to have had a far greater negative impact on the ability of U.S. companies to initiate and successfully complete M&A negotiations,” said Jana Mercereau, head of corporate mergers and acquisitions, Great Britain, WTW, in a statement. “Global M&A activity tumbled to its lowest level in more than a decade in the wake of the COVID-19 outbreak, with most of this decline driven by North America.”
Based on share price performance, WTW said its quarterly monitor shows that North America saw the sharpest fall in M&A performance. “Acquirers underperformed their regional index by -7.2 percentage points” with only 137 deals completed in the first half, WTW said. This compared with 188 deals in the same period a year earlier.
“This is the lowest number of North American deals for a six-month period since 2009,” WTW said.
WTW said European buyers performed 10.2 percentage points above their regional index in the first half, based on an increase in deals completed (80 deals compared with 68 a year earlier).
“This is also the first time in two years that Europe has recorded three consecutive quarters of positive performance,” WTW said. “Meanwhile, U.K. acquirers performed 16.9 percentage points above the index with 15 deals in the first half of this year.”
WTW said Asia-Pacific dealmakers saw a “more modest” 3.1 percentage point rise in the first half on lower volume of 82 deals compared to 95 a year earlier. “Perhaps more significantly, the region's outperformance in the last three months improved substantially at +8.0 percentage points based on 41 deals closed—the region's first significant positive quarterly performance since late 2016,” WTW said.
The quarterly monitor showed that deals took longer as the average time to close a deal in the first half of 2020 increased 8%, from 144 to 156 days, from the previous year, said WTW. “This trend is likely to endure, with M&A deals continuing to be delayed or canceled as companies try to wait out the worst of the downturn,” WTW said.
The quarterly monitor “covers all M&A transactions globally valued at $100 million or more across all industries, sectors and geographies,” WTW said in an email.