Private Equity Fuels M&A Activity to Yet Another New High for Q4 2018, Despite Regional Imbalances
9 August 2018
The mergers and acquisition (M&A) market appears to be ending the year on a record new high— according to the newest Q4 2018 edition of the Intralinks Deal Flow Predictor, just released.
An analysis of data from Thomson Reuters and Intralinks indicates that M&A activity is continuing its Q3 track fueled by record amounts of private equity (PE) dry powder competing with deal-hungry corporate acquirers. Globally, however, an unbalanced forecast may temper the M&A feeding frenzy.
M&A growth bounces back after a short dip
While in Q1 2018 the worldwide number of M&A deals had a 5 percent growth year-over-year (YOY), the number fell by 6 percent YOY for Q2 2018.
For 2H 2018, however, our predictive model forecasts the worldwide number of announced deals to be at 7 percent YOY — with a range of 0 percent to 14 percent.
This comes ten years after the global financial crisis, five years into the current M&A upcycle, two years after the Brexit vote and 16 months into the Trump presidency.
Leading the charge: RE, TMT and Telecoms
Over the next six months, worldwide deal announcements in Real Estate, TMT (Technology, Media and Telecoms), and Industrials sectors are predicted to show the strongest growth, at 3 percent YOY expected for the FY 2018 in the (within a range of 0 percent to 7 percent).
APAC takes the driver’s seat. Again.
While the rest of the world showed a 6 percent decline in YOY growth in 1H 2018, the 2H 2018 forecast for the Asia-Pacific region (APAC) dominated with 12 percent YOY growth in the actual numbers of announced deals.
For the next two quarters, we expect APAC to account for a whole 94 percent of the increase in announced deal counts worldwide.
Private equity’s skyrocketing may have a ceiling
As in Q2 2018, private equity (PE) remains the fuel to the M&A steep rise. Flush with capital amidst low interest rates, PE has been compressing deal timespans to record levels and driving up valuations. A strong global economy, low inflation and low interest rates are all positive signs for the M&A market — for the short-term.
However, we still believe the market may be nearing a cyclical peak. The imbalance of M&A activity across regions, with global equity markets remaining 5 percent below their January 2018 high, the growing threat of a full-blown international trade war between the US, China, and the EU, the increasing probability of a disorderly Brexit and the increasing protectionism around the world all remain mitigating factors.
Find out more in the Q4 2018 edition of the Intralinks Deal Flow Predictor.
Independently verified as a highly accurate six-month forecast of M&A activity, the Intralinks Deal Flow Predictor report is compiled by tracking early-stage M&A transactions globally that are in preparation or have begun due diligence.
Along with our forecast of M&A activity for the next six months, the latest issue of Intralinks Deal Flow Predictor includes:
- A spotlight feature on how high M&A valuations are affecting dealmaking
- An interview with Rupesh Khant, vice president of ICICI Securities, on the outlook for the Indian IPO market
- Regional data on how long M&A deals are taking to complete due diligence and their volume of due diligence information