Data Predicts Where M&A Is Heading in Q4 202217 October 2022
Data-driven SS&C Intralinks Deal Flow Predictor for Q4 2022 reveals opportunities for dealmakers in the wake of market volatility.
SS&C Intralinks has been a leader in applying cutting-edge technologies to due diligence and financial transactions for over 20 years. To date, over USD 34 trillion in global capital markets events, including mergers and acquisitions (M&A), equity/debt, fundraising and restructuring deals have utilized our services for successful execution.
From an M&A perspective, due diligence on over 13,000 transactions are executed through our platform annually, giving us tremendous proprietary insights into future market movements.
Our propriety SS&C Intralinks Deal Flow Predictor forecasts M&A volume up to six months in advance of market announcement, as six months is the average time for diligence.
This is done through our insights into tens of thousands of deals that come across our global desks annually.
With this information, we’re able to get an early view on the majority of M&A deals that are coming to market and we utilize that proprietary data to forecast anticipated volume, as will be announced by Refinitiv.
The first part of the second quarter of 2022 saw a continuation of the volatility and deal pressures that we experienced in Q1 2022.
Looking ahead, we are anticipating significant challenges to deal structures to continue in H2 2022 as inflationary pressures and higher interest rates are straining acquisition options for acquirers. However, our proprietary insights indicate that sellers globally are re-engaging the markets and this is contributing to a surprising uptick in deal volume that we are seeing in the second half of H2 2022.
Since Q2 of last year, we started seeing moderate but trackable impairments starting to nominally impact deal flow. That came to a head in Q1 2022 — although from a relative perspective, pre-announced volume in Q1 2022 still outpaced most of 2020 and all of 2019. Q2 2022 saw a material uplift that tracked toward the higher of the spectrum relative to 2021.
Our outlook for global quarter-over-quarter (QoQ) deal flow is trending toward the upper end of the range of +5 to +10 percent growth compared to the anticipated volume in Q3 2022.
Quarter-over-quarter yearly (QoQY), we anticipate more downward pressure with a neutral outlook in the range of -5 to +5 percent. We’re forecasting moderate declines toward the bottom end of that range compared to the peak M&A cycle of last year.
The QoQ uplift is giving us confidence that dealmakers are still actively engaging in inorganic strategies, but we will be keeping a keen eye through the coming quarters on the quality of assets coming to market and the resulting valuations that will certainly face more contest than the trailing 24 months. We are anticipating that current conditions are geared towards favoring acquirers, with many assets that experienced significant to material growth during the pandemic facing stagnating headwinds in this inflationary environment.
Asia Pacific (APAC)
APAC continues to face challenges coming out of China, the second largest economy in the world, which experienced material headwinds including sluggish GDP growth, slumping property markets and volatile lockdown policies from COVID-19.
Despite these challenges, APAC joined the global resurgence in M&A and was a leader in volume growth in Q2 compared to Q1. Major markets like mainland China and South Korea were leading the region in volume recovery.
We maintain a neutral outlook for the region on a QoQY basis, with a range of +5 to -5 percent, but we are expecting volume to reach the lower end of that range. On a QoQ basis, we expect the region to overperform with a range of 10 percent+ growth compared to the volume anticipated in Q3.
Europe, the Middle East & Africa (EMEA)
While EMEA continues to face challenges related to the conflict in Ukraine like the other regions we track, the region found solid footing this quarter to maintain or outpace the previous volume, with major markets like France and Italy leading the way.
We are maintaining a neutral outlook for the region on a QoQY basis, with a range of +5 to -5 percent, and we are expecting volume to reach the lower end of that spectrum.
On a QoQ basis, we expect the region to overperform with a range of 10 percent+ growth compared to the volume anticipated in Q3.
Latin America (LATAM)
Latin America never fails to surprise through M&A cycles. The region is ripe for seismic changes this year, including presidential elections in Brazil and Colombia, a constitutional referendum in Chile and Argentina’s continuing debt crisis.
Despite the potential volatility on the horizon, the region stabilized significantly on a quarterly basis and showed the strongest early-stage pipeline growth globally.
We are maintaining a neutral outlook for the region on a QoQY basis, with a range of -5 to +5 percent, and we are expecting growth to reach the lower end of that floor. On a QoQ basis, we’re anticipating volume to significantly surpass Q3 volume at a +10 percent forecast, with Argentina, Brazil and Colombia leading the way.
North America (NA)
We are forecasting a double-digit recovery in North American volume in Q4 2022 compared to Q3 2022. The U.S. saw a strong resurgence in Q2 which eclipsed two quarters of 2021 deal flow.
Canada also saw a material uptick compared to every quarter last year as well as Q1 2022.
For more detailed country information as well as our insights into regional sector activity, please contact your Intralinks rep or download our full report at Intralinks.com/dfp.
Brian S. Hwang is Director of Strategic Business & Corporate Development at Intralinks. Brian joined Intralinks from RR Donnelley Global Capital Markets where he primarily worked with clients in the Midwest and Northeast, consulting on initiatives related to disclosure issues for SEC financial reporting, US Proxy compliance and transactional due diligence. Brian started his career with New York City law firm Wachtell, Lipton, Rosen & Katz, where he was involved in the due diligence and execution of transactions, valued at over $350 billion.
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