Don't Rock the Boat: Is M&A Activity Slowing Down?
or me, the Q4 DFI decline has been confirmed by my conversations with bankers, corp dev professionals and lawyers. They told me December 2010 exhibited a definite decrease in the start of new deals.
22 February 2011
Relax. Don’t freak out. Things in the M&A market are good. In fact, they’re still very good. We released our latest quarterly Deal Flow Indicator (DFI) and year end DFI results today. Overall, 2010 was a big winner, showing a tremendous rebound from the doldrums of late 2008 and early 2009 that were brought on by the global financial crisis. The 2010 deal flow was up 33% from 2009. However, it’s unrealistic to expect that the numbers will continue to go up infinitely at every increment that you measure them. After six quarters of double digit sequential growth, the positive quarterly trends came to an end in Q4 2010. But it is a small correction, a mere three percent down in the M&A deal market that we observed in Q4 as an indicator heading into Q1 2011.
Last year, the “brief slowdown period” as I’ll call it (meager two percent growth) was seen in Q1 before the next two quarters of deal flow took off, averaging 10% growth in each quarter. And remember this refers to a global, leading indicator because deals are on Intralinks a few months before the other sources announce them. The market has already cleared out the cobwebs — we’re now through the short-lived correction. So really, the way to think about this might be like the market preparing to head higher in 2011 by recalibrating and renewing itself with more modest performance in a single quarter. Again, deal activity has been steadily rising by an average of almost 10% per quarter since Q1 2009 and we witnessed a 20% increase in the number of global deals in Q4 2010 versus Q4 2009 globally. Sometimes, red hot M&A markets like we observed in North America and certain emerging markets in mid-2010 need to take breathers.
For me, the Q4 DFI decline has been confirmed by my conversations with bankers, corp dev professionals and lawyers. They told me December 2010 exhibited a definite decrease in the start of new deals. They are just beginning to pick up the pace of closing out what they began working on in a busy Q3 2010 and bringing new deals to market. While it hasn’t been “slow” by any means compared to 2009, a partner at a major M&A law firm and close friend said over the weekend that what we saw in the last couple of months was “the calm before the storm, M&A for 2011 will be strong”. Other sources such as Thomson Reuters and Mergermarket continue to focus on increasing deal values (another positive sign) and reporting regional inconsistencies in the levels deal counts. The truth is, though, that this is the M&A market we all want to be in and I see nothing stopping this train with the current environment as it stands. Or should I say: let’s sale into a record M&A year!