2014 is turning out to be the year of the mega deal. A December 17th report from research firm Towers Watson points out that a very strong year for M&A is ending with a bang, with seven $10 billion plus deals closing so far in the fourth quarter.
Towers Watson on mega deals
Steve Allan, M&A Practice Leader (EMEA) at Towers Watson, noted: “A busy quarter culminates what has been an incredibly good year for the larger, more challenging deals, which are now here in a way which I’ve seldom seen before. Indeed M&A of all sizes is again on the up.
He continued: “The total number of deals globally has now reached levels not seen since before the financial crisis and given this gathering momentum, we can expect an equally strong start to 2015, and potentially the busiest January yet. Growing market confidence is likely to be further fueled by strong returns seen this year in even the more complex deals that cross borders and sectors.”
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Allan also highlighted that deals with real long-term synergies produced the most profit for the acquirer. “What we do know from experience is that a long-term perspective is crucial to successful deal-making. Investors that prioritise a strategy that combines talent and financial assets are more likely to sustain outperformance beyond year one than those that considering a merger in pure monetary terms.”
More on the year of the mega deal
The Towers Watson research, undertaken as a part of a partnership with Cass Business School, headlines that 165 large deals (worth over $1 billion) and 11 mega deals (valued over $10 billion) were finalized so far this year. The continued 6.7% share-price outperformance of acquirers in these larger deals is currently above the previous quarter and the corresponding quarter in 2013.
2014 has seen record numbers of deals being completed around the world: 844 deals topping $100 million so far in 2014, compared to just 720 deals in 2013. North America is by far the most active area for deals in terms of volume of activity, accounting for well over half of all deals (462).
Of note, the sectors producing the highest returns for the acquirer post-merger this year were consumer staples, healthcare and technology. Energy was the only sector that did not outperform its industry peers.