Credit Hunch: IntraLinks M&A Monitor Shows European M&A Industry is Cautious But Not Cowed

Credit hunch: IntraLinks M&A Monitor Shows European M&A Industry is Cautious But Not Cowed

Optimism falls but positive view still outweighs the negative
Move to the middle: fewer ‘mega deals’ anticipated in 2008
Sovereign Wealth Funds: presence in the M&A market expected to rise
Effective tracking of buyer interest primary factor influencing M&A success

London, 24 April 2008
Optimism in the European M&A market has fallen since September 2007, as the credit crunch continues to bite, according to the fifth bi-annual M&A Monitor conducted for IntraLinks, the leading provider of online workspaces. Positive sentiment has fallen by 30% with only 61% of respondents expressing a positive view on the 12-month M&A outlook. Survey respondents included 291 M&A professionals focusing on the European market, including corporates, bankers, lawyers and advisors.

More than 80% of respondents with a pessimistic outlook for the M&A sector see the lack of debt financing opportunities as the primary barrier to deal flow. Nearly three-quarters (74%) of respondents foresee a reduction in the number of so-called ‘mega deals’ and a projected increase in mid-size deals as the key M&A trend for 2008. Overall, two-thirds of those surveyed believed that general economic uncertainty will restrict the number of transactions.

The study suggests that the market will become increasingly cautious and diligent over the year ahead. With effective tracking of buyer interest shown as a primary factor influencing the success of an M&A transaction, the study highlights the clear advantages that using Virtual Datarooms (VDRs) can bring to the deal process. More than 90% of respondents familiar with them felt that VDRs reduce the timeframe for due diligence process by at least 10%, with almost two-thirds (62%) suggesting time-savings of more than 25 per cent.

The survey also notes the rise of the sovereign wealth fund (SWF). Two-thirds (66%) of those surveyed anticipate an increased presence of SWFs in the European M&A markets. Almost a third (30%) of respondents see such funds being significantly more active than in the past as a result of their large cash coffers at a time of constrained liquidity elsewhere in the market.

This development is underlined by almost 40% of respondents considering companies based in the Middle East, home to leading SWFs, as the most likely to acquire European businesses and assets. China and India, which had previously been identified as the most likely source of bidders in the European M&A market, lag behind the Middle East with 23% and 21% respectively.

The spectre of government intervention is a real cause of concern – almost a third of respondents (30%) view it as the biggest threat to deal completion, most notably in France and Spain. Interestingly, since the Autumn 2007 Monitor, the proportion of respondents identifying this as the primary ‘dealbreaker’ has trebled.

Across sectors, respondents predict that the energy sector will see the highest level of M&A activity (30%), rising to as high as 50% among Spanish respondents. Deal activity in the Financial Services industry is again predicted to feature prominently (29%) – almost unchanged from the Autumn 2007 Monitor (30%).

Commenting on the survey results, Andrew Pearson, managing director EMEA at IntraLinks, Inc said:

“The M&A market faces very challenging conditions, for the time being at least, but opportunities are still out there. The market, quite correctly, is cautious but not cowed. In the absence of cheap debt and cash surpluses, we anticipate a real flight to quality as companies choose their engagements with even greater circumspection.

“The whole financial industry is looking at better ways of managing risk, reducing costs and improving efficiency – precisely in line with the benefits that virtual datarooms (VDRs) can bring to the transaction process. Just as technology is essential to capitalise on a buoyant market; the same is true, if not more so, in flatter conditions. The use of VDRs in M&A continues to increase despite, and perhaps because of, a more challenging market environment.”

“The results of this survey confirm the value respondents attach to effective tracking of buyer interest and increasing the responsiveness of the deal team – as both are issues that VDRs address specifically. These factors are set to be even more important and valuable in the tougher M&A environment that we are seeing.”

About IntraLinks
IntraLinks® On-Demand Workspaces™ connect business communities and accelerate the intelligent flow of information and documents among participants. Through IntraLinks' secure, neutral, online environments, companies are better able to compete globally by accelerating essential business processes, simplifying communication and fostering rapid workflow. IntraLinks is easily accessible anywhere, anytime using a web browser.

Since 1997, more than 700,000 participants representing over 80,000 organisations worldwide have used IntraLinks On-Demand Workspaces™ to communicate and collaborate on thousands of projects and transactions. IntraLinks has been adopted widely in the financial services and pharmaceutical industries, where its clients include AstraZeneca Pharmaceuticals LP, Bank of America, Deutsche Bank, FDIC, TD Securities, Thomas Weisel Partners and WestLB, among hundreds of others. Founded in 1996, IntraLinks is headquartered in New York with offices around the world.