Year-end results from Willis Towers Watson’s Quarterly Deal Performance Monitor show that acquirers closing deals in 2015 outperformed their index1 by 10.1 percentage points (pp) over the year. In addition, completed M&A deals that meet the study criteria reached an all-time high of 1,041, as a record number (304) were posted in the fourth quarter, more than in any single quarter since the research began in 2008.

The research — run in partnership with Cass Business School — shows the number of completed megadeals over $10 billion reached 22 for the year (with five completing in the fourth quarter), the highest annual total since the research began.

“2015 was a standout year,” said Mary Cianni, M&A global lead, Willis Towers Watson. “We have not only seen an outstanding number of the very largest deals completing, but the M&A market has also shown strength in depth with the numbers passing the 1,000-deals-in-a-year mark for the first time.”

The research also highlights that acquirers in all sectors outperformed their indices2 in 2015, with Materials (25 pp), Industrials (18 pp), High Technology (14 pp) and Health Care (9 pp) well above their respective 2014 performances of 6 pp, 8 pp, 9 pp and 7 pp. From a regional perspective, North America continues to lead the table on volume of deals completed with 133, followed by Asia Pacific with 114 and Europe with 53.

Willis Towers Watson’s 2016 M&A predictions

  • Global economic volatility and politics will be a key factor.
    A dominating theme driving M&A activity will be political and economic instability. A number of events could combine to have global significance, such as further U.S. interest rate rises, the U.S. presidential election, Brexit (the possibility of Britain’s withdrawal from the European Union), European political uncertainty and Chinese market volatility. Any combination of these events could create winds of change, but whether they promote or depress activity will depend on if and how they coincide.
  • Megadeals will continue but may mask a gradual slowdown in activity.
    Pharmaceutical companies’ M&A activity should continue unabated and could continue to drive megadeal activity in 2016. While deal volume in monetary terms will remain high as we go into 2016, it will be interesting to see if a drop in the number of smaller deals emerges as a leading indicator that we are reaching the peak of the M&A cycle.
  • Cross-sector deals will continue to grow.
    Cross-sector and transformational deals have long been regarded as harder to complete and harder to realize value from, given the complications of integrating diverse business models and organizational cultures. 2015 saw a record number of these deals, both in number and as a proportion of all deals. We can anticipate this continuing into 2016.
  • Weak commodity prices will continue to create opportunities in the Extraction, and Oil and Gas sectors.
    As commodity prices remain weak, the Extraction, and Oil and Gas sectors will be looking to rationalize and create new income streams. Despite the turmoil in these sectors over 2015, successful acquirers outperformed their industry indices, and we expect to see more intra-sector deals in these areas as stronger players look to make the most of the opportunities that present themselves.

Willis Towers Watson Quarterly Deal Performance Monitor Methodology

  • All analysis is conducted from the perspective of the acquirer.
  • Share-price performance within the quarterly study is measured as a percentage change in share price from six months prior to the announcement date to the end of the quarter.
  • All deals in which 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 in which the acquirer held more than 50% of target shares prior to the acquisition have been removed, hence no remaining purchases have been considered.
  • Only completed M&A deals with a value of at least $100 million are included in this research.
  • Deal data were sourced from Thomson Reuters.

About Human Capital M&A

Willis Towers Watson’s Human Capital M&A practice advises clients on the human capital aspects in a deal situation. These range from key elements of a financial due diligence through to the integration of the workforce post-completion.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

1 MSCI World Index is used as default.
2 MSCI industry indices is used for sector-based analysis.