The Global M&A market struggles to add value and buyer performance has been in steady decline since a 2015 peak, according to long-term data compiled by Willis Towers Watson and Cass Business School.
2018 was a tough year for deal makers, who recorded their worst annual performance since the financial crash in 2008. What can potential acquirers expect in 2019?
«The ability to deliver anticipated benefits in terms of shareholder value for the buyer is at a ten-year low. On top of this, the market stress that characterised 2018 will persist, with rising regulatory uncertainty, ongoing trade and tariff negotiations, including Brexit talks and the U.S.-China trade disputes, making it ever more challenging to deliver deals successfully, Massimo Borghello, Head of Corporate M&A for Asia Pacific, Willis Towers Watson, said.
Based on short and long-term trends revealed by the data, as well as conversations with Willis Towers Watson’s clients, these are the five M&A predictions for 2019:
1. Things Can Only Get Better in 2019
2018 was a tough year for deal makers, who recorded their worst annual performance since the financial crash in 2008. Although complex headwinds remain, we are optimistic that the market will bottom out in 2019 and, supported by more clarity over the direction of the U.S. administration and Brexit, improve the position of buyers in achieving better value from their deals.
2. Fall in Foreign Deals
We expect to see a global decline in the number of cross-border deals due to regulatory constraints fueled by an increasing trend towards protectionism. This will lead to a more defensive strategy of domestic consolidation, for which some nations will be better equipped. The U.S. domestic M&A market, for example, has traditionally shown itself to be very robust, so we expect volumes to remain stable as acquirers focus their firepower on domestic targets.
3. No Uptick Expected in APAC
As well as a significant drop in deal volume, Asia-Pacific acquirers recorded the worst annual performance of all regions in 2018, with an underperformance of 17.1 percentage points below the regional MSCI Index. We expect M&A activity from Chinese companies to be muted in 2019, impacting volumes across the Asia-Pacific region.
4. Outside Interest in the U.K. Remains Strong
While ongoing uncertainty around Brexit is likely to translate into less M&A activity for U.K. companies in 2019, the positive results enjoyed by non-U.K. acquirers when buying in the U.K. will see Britain remain one of the most popular M&A target nations.
5. Mega Deals Continue to Struggle
There were 17 mega deals in 2018 (those valued at over $10 billion), which underperformed the market by 14.5 percentage points, the worst performance of all deal types.
Political uncertainty, from trade wars and growing protectionism to Brexit, will continue in 2019 and negatively impact mega deals in particular, as buyers will be cautious of transactions that take a long time to complete,» Borghello added.
