M&A in Asia shows signs of maturity

Record high levels of M&A activity for Asia in the first quarter but muted results globally

The number of Asian M&A deals completed [1] in the first quarter of 2017 is the highest number deals in recent history [2] according to Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM).

Asian acquirers completed 80 deals in Q1 compared to 62 the same quarter in 2016, a significant increase whilst elsewhere the global deal numbers have fallen from previous year’s first quarter results.

The research, run in partnership with Cass Business School, which tracks the number of completed deals over $100m and the performance of share price of the acquirer company against market indices, showed that despite an increase in deal volume, Asian acquirers market performance dropped against MSCI indices from previous, posting an average -2.4 percentage points (pp) below the market.

Jana Mercereau, Head of Corporate Mergers and Acquisitions for Great Britain, Willis Towers Watson comments: “Asia has continued to invest in M&A activity and although acquirer share price has dropped against regional indices, the ongoing trend for intra-regional and domestic deals as opposed to investment in other geographies is continuing strongly. For other regions, the results are not surprising considering the research looks at completed deals and M&A deals traditional take several months to reach completion; the first quarter’s results reflect a period of considerable economic uncertainty immediately post Brexit and pre US election results.”

Jana Mercereau continues: “In previous years we have seen huge peaks in share price performance from Asian acquirers, for the last few quarters we see a flattening of the performance levels aligning to results seen elsewhere in the globe. This could signify a maturing of the Asian M&A market and a move away from boom and bust deals to a more solid and predictable model.”

Outside of Asia the research shows, alongside a drop in deal number in Europe and North America, the four-year run of consistent quarterly outperformance of the market indices has come to an end. Acquirers in the first quarter of 2017 posted a performance of -1.3pp versus the index, well below the 3 year average of +6.3pp.

Jana Mercereau says: “The first quarter’s results are muted and this is reflective of the “wait and see” approach taken by companies last year. I predict the second quarter will see a significant pick-up as deals initiated in the post US election market confidence come to fruition. Whilst global interest rates remain low and markets continue to perform well it is likely we can see strong M&A activity across the globe as companies look to take advantage of the opportunities that arise.”