Acquiring businesses enjoy record performance in 2014

Share prices significantly higher than those of non-acquirers.

Businesses that acquired smaller companies in 2014 saw a share price on average 5.8 percentage points higher than those that did not, according to research by Towers Watson.

The Towers Watson Human Capital M&A figures, compiled in conjunction with Cass Business School, reveal that in 2013 the share price advantage gained by acquirers was only 4.5 percentage points.

There was also an increase in the overall volume of M&A activity in 2014, according to the Towers Watson Quarterly Deal Performance Monitor (QDPM). It recorded 928 deals last year – up 208 on the 2013 figure.

This was driven largely by strong activity in the Asia-Pacific region. Acquiring businesses in that area enjoyed an average share price dividend of 24.7 percentage points compared to those that saw no buying activity.

2014 also saw “mega-deals” come back into favour. This term refers to any single deal with a value of $10 billion or more. 12 were completed in 2014 – up from 4 the previous year.

See also: Top 15 M&A deals of 2014 announced

Predictions for 2015

In its predictions for 2015 Towers Watson tips Asia for another strong year, along with potential problems for “latecomers” to M&A activity.

This includes those companies that feel they need to get involved in the acquisition game for fear of being left behind – subsequently going through with deals without sufficient diligence.

Towers Watson M&A practice lead, EMEA Steve Allan said that 2015 is likely to be “an exciting year for spectators” due to increased and occasionally unpredictable activity in M&A.

“For acquirers it will feel more precarious, with the pressure not to get left behind in the race to growth coupled with the fear of not being the one that gets it wrong,” he added.

Allan also urged companies to look beyond the balance sheet when assessing the success or failure of M&A activity. 

Further reading on M&A

Related Topics