UK companies dominate European M&A in 2013

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  • UK acquirers make up almost 30% of all European M&A deals and financially outperform the region.
  • Notable decline in fourth quarter deal volumes in the UK and across Europe.

LONDON, 12 December 2013 – UK companies dominated the European M&A landscape in 2013, accounting for nearly a third of the deals completed, according to Towers Watson’s Quarterly Deal Performance Monitor (QDPM). The study of completed M&A deals worth over $100 million, run in partnership with Cass Business School, shows that of the 106 deals that have completed in Europe so far in 2013, 30 were by UK companies compared to seven in France and the Netherlands and just six by German firms. The research also shows that the share price performance of UK acquirers outperformed the European MSCI Index by an average of 3.1 percentage points (pp) over the course of the year, compared to an overall European average outperformance of 2.2pp for acquirers.

Steve Allan, M&A Practice Leader (EMEA) at Towers Watson, said: “The UK has always been a major player in the European M&A market but this year we have seen that dominance really assert itself, both in terms of deal volumes and share price performance for acquiring companies. Recent economic forecasts have indicated that the UK is set to be among the fastest growing developed economies and this could present further M&A opportunities for UK companies.”

Globally, acquirers around the world have enjoyed their best performance since the financial crisis in 2008, outperforming companies not involved in M&A activity by an average of 4.7pp. North American acquirers performed best, 8.1pp above the regional MSCI Index, a significant turnaround from the previous year where the region underperformed the index by 1.3pp. During the same period, acquiring companies in Asia-Pacific outperformed the regional index by 3.5pp (compared to a 0.1pp underperformance in in 2012), while performance in Europe was the lowest of the three regions, but still 2.2pp above the regional index (compared to outperformance of 2.4pp in 2012).

Steve Allan, said: “The big global M&A story for 2013 is share price performance of acquirers, which significantly outperformed those that did not acquire in all three regions. The reversal from a 1.3pp underperformance in 2012 to an 8.1pp over-performance in North America is particularly striking.”

In terms of the volume of deals completed, North America continues to lead the field with 375 deals over $100 million so far in 2013, accounting for nearly 60 per cent of the global total. Asia-Pacific has convincingly overtaken Europe (106 deals) as the second most active M&A region with 141 deals. As a result, for the second year in succession, Europe is the region with the lowest number of completed deals in 2013 and its lowest level since 2009.

Steve Allan said: “Two years ago we were talking about the Asia-Pacific region starting to match Europe on M&A deal volumes, but now it has overtaken Europe by some margin. This is not because Asian companies are doing significantly more deals than before but seemingly because European acquirers have been holding back with a notable drop off in the fourth quarter of 2013.

“However, during the past few months underlying political and economic uncertainty in Europe has diminished somewhat and growth forecasts are rosier meaning we could see many more European companies coming back in the M&A market in 2014.”

The research also shows that in 2013 on a global basis there were fewer ‘mega-deals’ (worth over $10 billion) than in prior years. Only four qualifying deals have completed in 2013, none of which occurred in the second half of the year, which is the first time this has occurred for any six-month period in nearly three years. The data also shows that in 2013 slow deals – those taking over 70 days from announcement to completion – performed better than quick deals (7.0pp vs. 3.1pp). In addition, it shows that domestic deals - where the acquirer and the target company are both based in the same country - outperformed cross-border deals by 5.2pp (7.0pp compared to 1.8pp).

Steve Allan said: “The lack of mega-deals, coupled with a penchant for domestic targets and unhurried completion times paints a picture of the relatively cautious acquirer being the most successful. While many companies have cash to spend on acquisitions and there is an improving economic outlook for many countries, there appears to be a surprisingly restrained approach to M&A.

Acquirers should be aware that previous research shows 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 and that there is a clear advantage for those acquirers willing to make the first move in their industry.”

Towers Watson Quarterly Deal Performance Monitor Methodology

  • All analysis conducted from the perspective of the acquirer and is based on standardised year-to-date analysis, as of 11 December 2013.
  • Share price performance is measured as percentage change in share price from six months prior to the announcement date to the end of the quarter in which the deal completed.
  • All deals where the acquirer owned less than 50% of the shares of the target after the acquisition were removed, hence no minority purchases have been considered. All deals where the acquirer held more than 50% of target shares prior to the acquisition have been removed, hence no remaining purchases have been considered.
  • Deal data sourced from Thomson One Banker.

About Human Capital M&A

Towers Watson’s Human Capital M&A Practice advises clients around the human capital aspects in a deal situation.  This ranges from key elements of a financial due diligence through to the integration of the workforce post completion.

About Towers Watson

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