Share prices of global acquirers continue to underperform World Index in the third quarter. M&A Quarterly Deal Performance Monitor: Q3 2017

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1 Share prices of global acquirers continue to underperform World Index in the third quarter M&A Quarterly Deal Performance Monitor: Q3 2017

2 Share prices of global acquirers continue to underperform World Index in the third quarter New research reveals global trend for successful M&A deals becoming increasingly difficult to deliver as markets react to changing political winds The global M&A market continues to struggle to add value, underperforming the Index in 2017 for the second quarter this year, which is a trend not seen since 2012, according to Willis Towers Watson s latest Quarterly Deal Performance Monitor (QDPM). The M&A research, run in partnership with Cass Business School, which tracks the number of completed deals over US$100 million and the performance of share price of the acquiring company against market indices, showed performance in Q was 1.7pp (percentage points) below that Index and essentially flat (0.2pp below Index) when looking at the past four quarters together. Figure 1. M&A quarterly analysis of market performance, global sample Median-adjusted performance of all acquirers throughout the period Median-adjusted performance of all acquirers over a three year rolling period Median-adjusted performance of all acquirers over one-year rolling period Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Note: The share price returns have been adjusted to Index returns over the corresponding period. The MSCI World Index is used as default, unless stated otherwise. 1 MSCI World Index is used as default, unless stated otherwise. 2 willistowerswatson.com

3 Figure 2. M&A regional analysis 2016 and Acquirer Returns Adjusted to the MSCI Regional Index Growing government, antitrust and regulatory challenges are likely to have had a significant impact on the volume of M&A deals in 2017 and the marked drop in performance globally, suggests Willis Towers Watson. The most recent example of tighter rules is the consultation paper just issued by the UK Takeover Panel to bring in additional requirements which will require more detailed information from bidders at an earlier stage in the deal process, and more transparency on the reality of post-deal implementation North America Europe Asia-Pacific Note: The share price returns have been adjusted to Index returns over the corresponding period. The MSCI World Index is used as default, unless stated otherwise. While deal activity in the UK and wider Europe remains healthy the region is bucking the global trend. On a broader global scale we are seeing increased pressure on dealmakers particularly for larger and cross-border deals. Whilst some of these pressures reflect political realities others, such as some of the Takeover Panel s ideas, formalise in a very public manner what many leading acquirers already regard as internal best-practice. Overall these pressures are shining a light on the reality that delivering a successful deal and realising value is difficult. Jana Mercereau, Head of Corporate Mergers and Acquisitions for Great Britain at Willis Towers Watson 2 The QDPM research for Q includes deals completed between 1 April 2017 and 30 September The number of deals completed in Q was [ ]. 3 M&A Quarterly Deal Performance Monitor: Q3 2017

4 Our study highlights a number of other interesting findings: UK acquirers have already secured nine deals so far in Q and are expected to improve on the ten deals completed in the same quarter last year. European acquirers generally also continue to be the stand out dealmakers during an otherwise challenging third quarter, returning a market outperformance of 6.8pp above the Index compared to 4.3pp the previous quarter. While acquirers in North America showed an underperformance of 3.0 pp in Q3 2017, deal makers from Asia-Pacific were significantly lower with an underperformance of 12.1pp against their respective regional indexes, which is an all-time low for the region. In the three-year rolling analysis, Asia-Pacific acquirers still remain in the top spot due to their consistent performance in the last three years, with 20.7pp above their regional Index followed by European and North American acquirers which have outperformed their regional indexes over the same period by 5.9pp and 1.1pp respectively. Following a slow start in the number of deals closed globally in the first half of the year, deals closed in Q3 are currently at 178 (612 YTD) with significant drops in North America and Asia-Pacific compared to prior years. There was also a marked decline in the volume of mega deals (worth more than US$10 billion), with only three completed in this category (9 YTD). The overall results for 2017 so far show, with the exception of Consumer Staples, Energy and Power, Industrials and Telecommunications, all other sectors have underperformed their respective indices. 4 willistowerswatson.com

5 Willis Towers Watson Quarterly Deal Performance Monitor Methodology in partnership with Cass Business School This study focuses on deals which were completed during the second quarter of In order to perform a comparative analysis, data from Q and Q have been included. The sample is global, and all deals have a value of US$100 million or above. In addition, all merger-of-equals deals, and minority and remaining purchases have been excluded, as well as those in the Real Estate sector. The analysis has been conducted from the point of view of the acquirer and share price performance compared to various MSCI indices (world, industry and region). Percentage changes in share prices are measured from six months before the announcement date to the end of the corresponding quarter postcompletion. Medians have been used throughout. 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. This ranges from key elements of a financial due diligence through to the integration of the workforce post-completion. Further information For further information about the research, or for help with your M&A activity, please contact your Willis Towers Watson consultant or: Jana Mercereau jana.mercereau@willistowerswatson.com It s worth noting that despite this second quarterly drop and the prospect of deeper government intervention in deal making in the UK and globally, acquirers have continued to track well above market indices, maintaining a strong return on deals that have closed and providing strong evidence that, done well, M&A can deliver significant value. The three-year rolling average performance for global acquirers still remains a healthy 5.4pp above the Index and an abundance of capital and cheap debt mean a flurry of deals could yet unfold during the remainder of Jana Mercereau, Head of Corporate Mergers and Acquisitions for Great Britain at Willis Towers Watson 5 M&A Quarterly Deal Performance Monitor: Q3 2017

6 Appendix A: Data descriptives: Q3 2016, Q and Q Q3 YTD 2017 Median Deal Value ($m) 2017 Average Deal Value ($m) All ,184 Asia-Pacific Europe ,881 North America ,355 Rest of the world 5 1, ,820 Quick deals Slow deals ,600 Large deals (over or equal to $1bn) 42 2, ,940 Mega deals (over or equal to $10bn) ,144 Industry: Consumer Products & Services Consumer Staples ,453 Energy & Power ,897 Financials Healthcare ,342 High Technology Industrials Materials ,092 Media & Entertainment Retail ,098 Telecommunications ,821 6 willistowerswatson.com

7 Appendix B. Top 25 deals by value of transaction: Q Date announced Date effective Acquirer name Target name Value of transaction ($M) 21/10/ /07/2017 British American Tobacco PLC Reynolds American Inc 49,054 20/02/ /08/2017 Vale SA Valepar SA 20,957 16/06/ /08/2017 Amazon.com Inc Whole Foods Market Inc 13,561 07/09/ /09/2017 Micro Focus International PLC Hewlett Packard Entrp-Segment 8,352 18/12/ /07/2017 Fairfax Financial Holdings Ltd Allied World Assur Co Hldgs 6,108 18/04/ /07/2017 Cardinal Health Inc Medtronic PLC-Patient Care 6,100 12/05/ /09/2017 Drillisch AG 1&1 Telecommunication SE 5,738 15/12/ /07/2017 Lonza Group AG Capsugel Inc 5,500 04/03/ /08/2017 Standard Life PLC Aberdeen Asset Management PLC 4,642 18/07/ /08/2017 McCormick & Co Inc Reckitt Benckiser Grp-Food Div 4,200 12/12/ /07/2017 Amundi SA Pioneer Investment Mgt 3,739 15/05/ /08/2017 Moody's Corp Bureau Van Dijk 3,281 24/01/ /09/2017 Yancoal Australia Ltd Coal & Allied Industries Ltd 3,100 10/04/ /09/2017 Knight Transportation Inc Swift Transp Co 2,959 16/08/ /07/2017 Hubei Sanonda Co Ltd Adama Agricultural Solutions 2,916 13/01/ /07/2017 Quinpario Acquisition Corp 2 Novitex Holdings Inc 2,800 18/05/ /09/2017 Elis Services SA Berendsen PLC 2,785 15/05/ /08/2017 Vodacom Group Ltd Vodafone Kenya Ltd 2,594 11/05/ /07/2017 Vivendi SA Havas SA 2,518 08/05/ /07/2017 Coach Inc Kate Spade & Co 2,380 10/05/ /08/2017 INC Research Holdings Inc inventiv Health Inc 2,182 06/06/ /07/2017 SemGroup Corp Buffalo Parent Gulf Coast 2,168 21/02/ /09/2017 Ternium SA Thyssenkrupp Slab Intl BV 1,805 18/04/ /07/2017 Post Holdings Inc Weetabix Ltd 1,759 31/10/ /08/2017 Xinjiang Urban Constr (Grp) Co Zhuolang Intelligent Mach Co 1,518 7 M&A Quarterly Deal Performance Monitor: Q3 2017

8 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 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimise 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. Willis Towers Watson 71 High Holborn London WC1V 6TP Towers Watson Limited (trading as Willis Towers Watson) is authorised and regulated by the Financial Conduct Authority in the UK. The information in this publication is of general interest and guidance. Action should not be taken on the basis of any article without seeking specific advice. To unsubscribe, eu.unsubscribe@willistowerswatson.com with the publication name as the subject and include your name, title and company address. willistowerswatson.com/social-media Copyright 2017 Willis Towers Watson. All rights reserved. WTW13660/09/2017 willistowerswatson.com