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Acquirers Outperformed Throughout 2011, Despite Testing Market Conditions: Towers Watson

Posted on 20 Dec 2011

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Latest year-to-date figures show that acquirers have, on average, continued to outperform the Global MSCI Index (the index) in 2011, with adjusted returns of 2.9 percentage points (pp) above the index for the year to date. The figures which come from the latest issue of Towers Watson’s Quarterly Deal Performance Monitor (QDPM) demonstrate that the share prices of acquirers have continued to outperform their indices, despite detrimental market conditions and deflated levels of business confidence.

The latest edition of the study, commissioned by global professional services company Towers Watson and based on quarterly analysis by Cass Business School, also shows that:

    •    Dealmakers continued to outperform respective indices, despite a poor end-of-year period
    •    Asia-Pacific acquirers closing deals in 2011 add more value to their shareholders, outperforming their regional index by 6.7 pp compared to Europeans, who still outperformed their index by 4.8 pp
    •    North American buyers closing deals in 2011 show less material outperformance with a return of 1.4 pp over their regional index.
Regional variation in the speed of deal ?Looking back on the 16 consecutive quarters of the study, it also highlights the marked difference in a deal’s time to completion based on regional location. On average, Asia-Pacific acquirers take 108 days to complete a deal, compared to just 57 days by their North American counterparts; a difference of almost 50%. European acquirers take 89 days on average to complete a deal.

Steve Allan, M&A Practice Leader for Europe at Towers Watson said: “2011 overall has been a strong year for corporate transactions, with more deals being completed this year than in 2010 even despite the increasingly turbulent market conditions, gloomy global economic outlook and a significant drop in M&A activity in the last quarter. The latest quarterly results from our study continue to show that acquirers outperform market indices, supporting the view that even in an extremely testing environment buyers that hold their nerve, and are able to complete deals, are being rewarded by investors.

“The significant difference in the typical timeframe to complete a deal is an interesting finding and reflects differences in approaches to dealing with governance, corporate attitudes to M&A and willingness and ability to operate at speed, as well as the different nature of corporate transactions in different parts of the world.”

Towers Watson Quarterly Deal Performance Monitor Methodology

    •    Focuses on deals completed in the fourth quarter of 2011 (1 Oct - 9 Dec 2011) and year-to-date (1 Jan – 9 Dec 2011)
    •    All deals have a value of $100m or above
    •    All analysis conducted from the perspective of the acquirer
    •    Share price performance within quarterly study measured as percentage change in share price from six months prior to the announcement date to the end of the quarter, year to date figures represent aggregation of results from Q1, Q2, Q3 and Q4 studies
    •    All deals where 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 where the acquirer held more than 50% of target shares prior to the acquisition have been removed, hence no remaining purchases have been considered.
    •    Deal data sourced from Thomson One Banker
    •    Total number of deals 2011 year-to-date - 740.