Global early-stage mergers and acquisitions (M&A) activity in Q3 2015 increased by just 5.6 per cent compared with the same period last year, the slowest rate of growth for almost three years.
That’s according to the latest Intralinks Deal Flow Predictor (DFP) report which forecasts the volume of future M&A deal announcements by tracking the number of early-stage M&A deals that are in preparation or have reached the due diligence stage. On average, these deals are six months away from their public announcement.
While Intralinks predicts that 2015 will be a new record year for global M&A announcements, deal making confidence for 2016 appears to have weakened in North America (NA) and Asia Pacific (APAC) driven by concerns over a China-driven global economic slowdown, fears of a further correction in global equity markets and confusion among dealmakers over the pace and timing of expected US interest rate rises.
Indeed, according to the most recent quarterly Intralinks M&A Dealmakers Sentiment Survey, only 43 per cent of dealmakers around the globe claimed to be optimistic about the current deal environment, the lowest level for two years. The same survey also revealed that 46 per cent of EMEA dealmakers expect a slowdown in Chinese economic growth to have an impact on M&A activity in their region over the next six months.
While early-stage M&A activity in NA declined by 3 per cent in Q3 2015, and increased by just 3.2 per cent in APAC, EMEA increased by 11 per cent. This increase is being supported by improving European economic conditions, loosening monetary policy and continued interest from foreign buyers in the region’s high quality companies and assets. While EMEA as a whole is performing strongly, German early-stage M&A activity declined by 6.9 per cent in Q3 2015 – the second consecutive quarter that Germany has shown a decrease, following Q2 2015’s 7.1 per cent decline. Negative headlines from the Volkswagen emissions scandal could further affect confidence levels in Germany, Europe’s third largest M&A market.
Conversely, the UK saw an 18 per cent increase in early-stage M&A activity in Q3 2015, as dealmakers welcomed the Conservative victory in May’s general election amid evidence of continuing robust UK economic growth.
Elsewhere, Latin America (LATAM) demonstrated the strongest growth in early-stage deal activity in Q3 2015, increasing by 48.6 per cent. This follows seven quarters of low or negative growth in M&A activity in LATAM, as the severe decline in commodity prices over the past 18 months took its toll on the region’s two largest economies, Brazil and Mexico.
“While the increase in global early-stage M&A activity that we have seen in Q3 2015 points to continued growth in deal announcements in Q1 2016, we have seen a deceleration in activity compared to the first half of 2015,” says Philip Whitchelo, Intralinks’ vice president of strategy and product marketing. “With evidence that the global economy is slowing down, there are reasons for caution as we look ahead into 2016.
