ARLINGTON, Va., Oct. 31, 2018 (GLOBE NEWSWIRE) -- Deal value for global insurance M&A was up $44.4 billion in the first six months of 2018, driven by a slew of megadeals that pushed value to its highest first-half total since the financial crisis, according to a new report from leading global advisory, broking and solutions company, Willis Towers Watson (NASDAQ:WLTW) and Mergermarket.
The first half of the year saw 14 deals worth over $600 million taking place in this sector, although total deal volume was down to just 84 deals, the lowest number since 2009.
Key deal drivers behind this surge in value relate to the changing nature of business models. As regulatory pressures become the norm, new models are emerging and more businesses are seeking to return to their core strategy.
“As processes, reporting and monitoring become increasingly business as usual, executives have taken back their ‘bandwidth’ and got on with the job of strategically guiding their companies,” said Fergal O’Shea, senior director, Willis Towers Watson, as he described the impact of Solvency II implementation.
A growing trend for companies wishing to take this approach is to divest unwanted parts of their business, meaning that valuable assets are once again on the market. For private equity investors, record levels of inflow — with dry powder levels reaching US$1 trillion in 20171 — has driven interest in these assets and seen complex acquisitions from these buyers in 2018.
Regulatory change has also played a significant role in relation to U.S. assets, as tax reform in the region has provided an immediate boost to company earnings since the turn of the year, which means U.S. insurers instantly became more attractive to foreign insurers who see the potential to earn more from the U.S. than before.
While these drivers support a positive outlook for global insurance M&A in the coming months, time to market may extend the phase to execution, given higher deal values and potential deal complexity.
“We’re seeing a much longer stretch of time from announcement to closing,” said Jack Gibson, managing director at Willis Towers Watson. “However, debt continues to be cheap, and following the recent tax reforms, U.S. companies have been given a steroid kick. We will continue to see an active M&A market, it’s just a matter of paying the right price and overcoming the hurdles that have led to deals taking longer to consummate and are perhaps driving the lower number of deals this year.”
Key findings from the report include:
- Deal sector splits in H1 2018 reflected previous years. P&C led the way with 44 deals, followed by the life sector with 22 deals, while there were 11 in composite and seven in reinsurance.
- The insurance sector has been slower to adapt to new technologies than some other sectors. With investment in InsurTech falling behind its digital competitors, it will be important for businesses to engage with this in the future.
- There is a growing trend of foreign investment from Asian companies, looking to grow a geographical footprint and acquire capabilities. In particular, we will see tactical acquisitions by Asian players in more developed markets – a growing trend due to China’s Belt and Road initiative.
- Political and economic uncertainty could affect global dealmaking, with volatility surrounding Brexit and tensions between China and the U.S. potentially threatening deal acquisition — although the sector remains optimistic that the domestic focus of insurance M&A volume may protect it from cross-border tension.
About the report
- Deal coverage is global and covers M&A deals announced from January 1, 2018, to June 30, 2018.
- Only completed M&A deals with a value of at least $5 million that meet the study criteria are included in this research.
- When the stake acquired is greater than or equal to 30% of the entire share capital (or 10% if the target is based in Asia Pacific) and the deal value is at least $5 million, the deal will be included.
- Deal value is taken as the sum of the consideration paid by the acquirer for the equity stake in the target plus the value of the net debt in the target, where applicable.
About Insurance Consulting and Technology
Willis Towers Watson’s Insurance Consulting and Technology business has over 1,200 colleagues operating in 35 markets worldwide. It is a leading provider of advice, solutions and software — primarily to the insurance industry. Its consulting services help clients manage risk and capital, improve business performance and create competitive advantage by focusing on: financial and regulatory reporting, enterprise risk and capital management, M&A and corporate restructuring, products, pricing, business management and strategy.
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 over 40,000 employees serving in more than 140 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.
About Mergermarket
Mergermarket, an Acuris company, reports on deals six to 24 months before they become public knowledge, giving subscribers a powerful competitive advantage. With the largest network of dedicated M&A journalists and analysts, Mergermarket offers the most comprehensive M&A intelligence service available today. Our reporters are based in 67 locations across the Americas, Europe, Asia Pacific, the Middle East and Africa. Visit mergermarket.com.
Media contact
Ileana Feoli: +1 703 258 8556
ileana.feoli@willistowerswatson.com
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1According to research firm Preqin