M&A: Reasons to be cheerful...?

Any optimism shown by those involved in M&A is understandable. According to mergermarket, global transaction volumes for the first half of the year were down by 46% when compared to last year, and values fared no better being down some 43%.


16 September 2009

Let me tell you, it's not all doom and gloom in the markets; even the weather in London has been fine of late. Indeed, the recent spate of M&A activity such as Walt Disney's approach for Marvel, Kraft's offer for Cadbury and the announcement of the T-Mobile merger with Orange, together with signs of recovery and stability in the global financial markets, has given rise to some debate as to whether global M&A is making a comeback and the storm clouds are beginning to part.

One thing is for sure: Any optimism shown by those involved in M&A is understandable. According to mergermarket, global transaction volumes for the first half of the year were down by 46% when compared to last year, and values fared no better being down some 43%. As a result, any deal activity involving major companies with deal values in the billion dollar mark could only be seen by M&A professionals as positive news, in what has been a very disappointing year so far. Additionally Intralinks' Deal Flow Indicator, which measures activity on Intralinks virtual datarooms, saw a 10% increase in global deal activity in Q2 '09 from Q1 '09.

Landscape CloudsHowever, the notes of cautious optimism were echoed in a recent Intralinks-sponsored Mergermarket webinar. Entitled "Corporate M&A: Strategies for Success", the webinar brought together four seasoned corporate M&A practitioners to discuss their experiences and what they see driving transactions in today's market. (Here's the full webinar replay.)

Overall, the panellists felt that the "green shoots" of recovery in M&A were starting to show, forecasting an increase in M&A activity in the coming months. What also came out clearly in the discussion was how, as a result of the global economic downturn, the relationship between corporations and banks have changed. Conversations between companies that have weathered the storm and their banking advisors is now more focussed on strategic goals, rather than focussed on execution of deals. Opportunities and targets are now being discussed in relation to coming out of the recession and executing quickly on deals that will benefit the core business when the time is right.

The panel also discussed the large number of insolvency deals that they have come across this year. One of the main challenges panellists' cited regarding these deals was the need to establish whether a business is recoverable whilst conducting due diligence in a highly compressed time frame. This is something we at Intralinks know all about: In fact, I was on call this morning with an advisor for a distressed company who had recently opened an Intralinks Exchange for a distressed company on a Tuesday and closed it, having found an acquirer, on the following Saturday.

Clearly, technology has a part to play in the current M&A environment. If timing and speed are paramount, then virtual datarooms are a tool that businesses will use increasingly to help streamline the deal process and make execution fast and simple when needed.

So things are changing, M&A markets might be moving a little, but they are fundamentally different than those pre-crunch. Distressed and strategic acquisitions will drive M&A volumes in the near term but the recovery may well take a while longer, but from what I've been hearing there are some reasons to be cheerful about the future of M&A.

Yet even as I write these tempered words of optimism, it has just started to rain outside...