Global economic volatility and politics will be key factors driving merger and acquisition (M&A) activity in 2016 following a record-breaking year marked by all-time high deal volumes and high returns for acquirers a research report released by Willis Towers Watson's said on Tuesday.

The global advisory broking and solutions company said further US interest rate hikes the US election a potential Brexit European political uncertainty and Chinese market volatility are factors that could impact M&A activity among others.

"Any combination of these events could create winds of change but whether they promote or depress activity will depend on if and how they coincide" Willis Towers Watson's said.

The research shows that acquirers who closed deals in 2015 outperformed their index by 10.1 percentage points. In addition completed M&A deals that met the study criteria reached an all-time high of 1041 as a record number (307) were posted in the last quarter more than in any single quarter since the research began in 2008.

The research - run in partnership with Cass Business School - shows the number of completed mega deals (over $10 billion) reached 22 for the year (with five completing in fourth quarter) the highest annual total since the research began.

However according to market data from a different source in 2015 around $5 trillion in deals were cut globally bolstered by consolidation in the healthcare sector where drugmakers hospitals and providers are combining in an effort to increase their scale. There have been a record 69 deals of over $10 billion including 10 transactions of over $50 billion also a record high.

Steve Allan M&A practice leader (EMEA) at Willis Towers Watson said: "2015 was a standout year. We have not only seen an outstanding number of the very largest deals completing but the M&A market has also shown strength in depth with numbers passing the 1000 deals-in-a-year mark for the first time."

In its forecast the report said pharmaceutical company M&A activity should continue unabated and could continue to drive mega-deal activity.

"While deal volume in monetary terms will remain high during the year it will be interesting to see if a drop in the number of smaller deals emerges as a leading indicator that we are reaching the peak of the M&A cycle."

According to the report cross-sector and "transformational" deals have long been regarded as harder to complete and harder to realise value from. 2015 saw a record number of these deals both in number and as a proportion of all deals.

The report observed that as commodity prices remain weak the extraction and oil and gas sectors will be looking to rationalise and to create new income streams. "Despite the turmoil in these sectors during 2015 successful acquirers outperformed their industry indices and we expect to see more intra-sector deals in these areas as stronger players look to make the most of the opportunities that present themselves."

Allan said 2016 is going to be another exciting year for M&A with plenty of opportunities. "However while the rewards can be significant it's important to remember that these pay out over the long term and that the key to realising them is careful planning and integration execution."

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Issac John Associate Business Editor of Khaleej Times is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years including 23 years with Khaleej Times. A post-graduate in English and graduate in economics he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends he is respected for his astute understanding of the local business scene.