The Intralinks Deal Flow Indicator (DFI) for the quarter ended 30 June shows 16 per cent quarter-on-quarter (QoQ) and 12 per cent year-on-year (YoY) increases in early-stage global M&A activity.
The latest data reveals particularly strong performances in Europe, Middle East and Africa (EMEA) and North America. Overall, this quarter’s results point to sustained momentum in M&A activity to the end of 2014, building on the strong levels of M&A activity seen in the last year.
Based on the results of the Intralinks DFI so far this year and its strong correlation to the volume of future announced deals, Intralinks is predicting that global announced M&A volumes for 2014 as a whole will, for the first time since 2010, show an annual increase of between six and 10 per cent, compared to 2013.
“The global M&A market is continuing to exhibit higher levels of activity compared to 2013, maintaining optimism among dealmakers,” says Matt Porzio, vice president of M&A strategy and product marketing at Intralinks. “The combination of a good lending environment and high quality assets and companies for sale are driving this growth. Deal volume continues to go up and we expect to see a good number of high profile deal announcements until the end of 2014, especially in sectors like manufacturing and telecommunications, media and entertainment.”
The Intralinks DFI tracks global M&A sell-side mandates and deals reaching due diligence prior to public announcement, providing a predictor of future global M&A activity levels. The Intralinks DFI is based on Intralinks’ insight into a significant percentage of early-stage M&A transactions.
Europe continues to perform strongly and consistently, with a 17 per cent YoY increase, paired with a 17 per cent increase QoQ. Even countries that were recently written off as poor environments for investments, such as Spain, Portugal and France, are making a comeback. Germany continues to be especially strong and is still seen as a safe haven for investments. For the last four quarters, EMEA has shown strong performance and Intralinks anticipates that this trend will continue throughout 2014.
The level of North American early-stage M&A activity grew 17 per cent YoY, sustaining the momentum in this market from 2013. Deal volume was up 22 per cent QoQ, reflecting some seasonal variation, and the fact that some companies worked to complete deals while interest rates remain low and confidence in an economic recovery in the United States continues to increase.
Latin America remains weaker than North America and EMEA but is poised for growth. Although early stage M&A activity was down seven per cent YoY, there was a healthy increase of 20 per cent QoQ. This surge was led by Brazil, which alone saw a 26 per cent increase QoQ, which Intralinks expects will be reflected in deal announcements later this year. Contrary to these findings, however, Intralinks’ Global Sentiment Survey showed that dealmakers in Latin America continue to express reduced optimism about prospects for the region, including for Brazil, for the remainder of 2014.
Deal activity levels in the Asia Pacific region remain volatile, down 15 per cent YoY and QoQ. While Japan is quite strong, the Chinese government, one of the largest investors in the region, continues its economic realignment resulting in decelerating overseas acquisitions, which is having a notable affect in Australia and beyond.
In June 2014, Intralinks conducted a survey of more than 1,000 global M&A professionals to gauge dealmakers’ sentiments and views on the M&A market. It found that 67 per cent of M&A professionals are optimistic about the current deal environment, consistent with reported sentiment from the last two quarters.
A further 77 per cent predict M&A activity will increase over the next six months, consistent with last quarter and with the Intralinks DFI data.
North American respondents again expressed the most optimism about future deal activity in 2014, with 80 per cent expecting an increase, while respondents in Latin America continue to show the most pessimism, with only 37 per cent expecting increased deal activity through the remainder of the year
Intralinks’ Global Sentiments Survey showed that dealmakers have some emerging doubts regarding deal valuation, which survey respondents all agreed was the greatest impediment to getting deals done.
Shareholder activism does not appear to be a concern. Despite some reports of increased shareholder activism against underperforming companies, dealmakers do not really see signs of an increase, with only 52 per cent of respondents expecting shareholder activism.
Despite indications from recent deal activity, only 57 per cent of respondents see a sign of a tech bubble. Interestingly, 71 per cent of UK respondents thought the recent deals and tech company valuations were a sign of a tech bubble.
While many dealmakers have been discussing the number of mega-deals already announced in 2014, only half of survey respondents think this is a sign that more mega-deals will be announced by the end of this year.
