Merger and acquisition (M&A) activity is often a great barometer to determine the health of the economy and to find how confident businesses are on economic outlook. Corporate leadership will more times than not decide to halt any mergers or acquisitions if they believe that the economic environment could be worsening. According to Towers Watson, the first three months of 2015 has seen a record amount of activity in the M&A space. Just looking at large deals worth $1 billion or more, Towers Watson and Cass Business School have seen 41 large deals close so far during the first quarter of 2015. The partnership has also seen two mega deals close so far this year, valued at $10 billion or more.
Pharmaceutical companies make up a majority of the large M&A deals so far
Last year, pharmaceutical and biotechnology firms saw mergers and acquisitions deals reach a record of $212 billion. This year, the industries are likely to break that record, as we continue to see a flurry of biotech and pharmaceutical deals popping up. “This level of M&A activity is unusual for the early part of the year, with pharmaceuticals accounting for the bulk of very large deals completed in 2015 so far. There is a prevailing trend of outperformance for acquirers and consistency across sectors, with acquirers in general outperforming their industry peers, with the notable exception of the financial sector” says Steve Allan, an M&A Practice Leader at Towers Watson.
M&A activity continues to be strongest in Asia Pacific region
Asia-Pacific region continues to dominate the M&A regional benchmark and lead the world in M&A activity since it took over the top spot in early 2014. Asia Pacific M&A activity is 21.8% above the regional benchmark. Europe’s M&A activity is 2.4% above the regional benchmark and North America brings up the rear with 1.4% above regional benchmark.
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While M&A activity continues to remain vibrant. Steve Allan of Towers Watson says that some of the deals have been due to political uncertainty. For instance when looking at UK’s M&A activity, a good part of this is being spurred by a budget announcement coming this week and elections on the horizon in a little over a month. These uncertainties have helped continue to drive M&A activity, much like what Allan believes the US will witness during Q1 2016 with US elections later in the year, etc. Overall the bottom line here is that M&A is heating up and looks to continue throughout next year.