Acquiring firms outperform the rest of market

EUROPEAN firms that make acquisitions tend to outperform the rest of the market, according to new research released today.

Second-quarter figures from Towers Watson’s Quarterly Deal Performance Monitor (QDPM), which records data on all deals with a value of at least $100m (£64m), demonstrates that acquirers within both European and Asia-Pacific markets continue to outperform their respective regional MSCI indices.

The data shows European acquirers outperforming their MSCI index by 3.8 percentage points (pp), while Asia-Pacific acquirers generated a return outperformance of 1.1pp.

However buyers in North America saw a weakening in year-to-date performance, with a 3.3pp fall in returns.

“The results emphasise a trend observed over recent quarters whereby acquirers, who persevere in seeing a deal through to completion, have experienced positive gains, despite a languishing market,” said Steve Allan, M&A practice leader for Europe at Towers Watson, who commissioned the report from Cass Business School.

“This is the case in Europe, where it would appear that buyers who can demonstrate that a deal represents a robust route to growth and can complete the acquisition are being rewarded with market outperformance.”

The report also reveals that deals that complete quickly – within 70 days of the initial announcement – were far more beneficial to the firms involved. Fast deals outperformed the index by 4.3pp while slow deals were 2.3pp below the index. “Typically, a longer period to completion is representative of a greater challenge within the due diligence and/or negotiation period,” it said.