The Intralinks Deal Flow Predictor, a predictor of future mergers and acquisitions (M&A) announcements, forecasts that the number of worldwide announced M&A deals in Q1 2018 will increase by around 2 per cent compared to Q1 2017.
The dealmaking environment is being supported by a combination of a gradual pickup in global economic growth, subdued inflation in advanced and emerging economies, buoyant asset markets and historically low interest rates.
There are risks, however. “The risks to the scenario of steadily increasing M&A activity are twofold: political and financial,” says Philip Whitchelo (pictured), VP of Strategy & Product Marketing at Intralinks. “Increases in economic nationalism, protectionism and restrictions on global trade and cross-border economic integration all have the potential to negatively affect dealmaking sentiment. With global equity markets at record highs, and almost nine years since the last major trough, a correction that turns into a more serious sell-off could also prove negative for dealmaking confidence,” he added.
In Q1 2018, Intralinks is forecasting year-over-year (YOY) growth in the number of announced M&A deals in three out of the four global regions: Asia Pacific (APAC), predicted to be up around 14 per cent; Europe, the Middle East and Africa (EMEA), predicted to be up around 6 per cent; and Latin America (LATAM), predicted to be up around 3 per cent. North America (NA) is predicted to be down around 11 per cent, due to an exceptionally strong Q1 2017 comparison period.
In APAC, all regions are showing increasing volumes of early-stage M&A activity, with Southeast Asia, India and North Asia (China, Hong Kong and South Korea) making the strongest contributions to APAC’s growth. Japan recorded its first quarter of increasing early-stage M&A activity since Q4 2016, with the number of early-stage deals rising by 6 per cent YOY. Despite the political instability on the Korean peninsula and in Myanmar, for most of the APAC region, strengthening global economic demand and supportive fiscal and monetary policy actions are driving vigorous economic growth and increasing dealmaking confidence. The Real Estate, Materials and Consumer & Retail sectors are predicted to lead the growth in APAC M&A announcements over the next six months.
In EMEA, two of the region’s largest M&A markets, the UK and Germany, are noticeably failing to contribute towards EMEA’s growth. M&A activity in Germany has declined in 2017, with the number of announced deals in the first nine months falling by 8 per cent YOY. German early-stage M&A activity also declined in Q3 2017, dropping by 10 per cent YOY. In the UK, early-stage M&A activity in Q3 2017 fell by 5 per cent YOY. The rest of the region looks solid, with Eastern Europe, the Middle East, Africa, Northern Europe, Spain and Italy all showing double-digit increases in early-stage M&A activity. The Materials, Real Estate and Healthcare sectors are predicted to lead the growth in EMEA M&A announcements over the next six months.
In LATAM, early-stage M&A activity has increased YOY for the fourth consecutive quarter, confirming the region’s return to growth. The region’s economic activity has rebounded in 2017 and is forecast to increase steadily over the next two years, driven by increasing consumption in Brazil and Colombia, economic and monetary reforms in Argentina and energy-sector liberalization in Mexico. The Healthcare, Technology, Media & Telecoms (“TMT”) and Financials sectors are predicted to lead the growth in LATAM M&A announcements over the next six months.
In NA, supportive financial conditions, a booming US equity market and strong business and consumer confidence are all contributing to the current buoyant NA M&A market. Despite the significant increase in the number of announced M&A deals in NA in 2017, early-stage deal activity in NA in Q3 2017 fell by 7 per cent YOY. This could point to concerns among US dealmakers over changes to the 23-year-old free trade agreement with Canada and Mexico that the Trump administration is pursuing, as well as the increasing cost of money as the US Federal Reserve pursues a policy of interest rate rises. The Healthcare and Energy & Power sectors are predicted to lead the growth in NA M&A announcements over the next six months.
The Intralinks Deal Flow Predictor forecasts the number of future M&A deal announcements by tracking early-stage M&A activity – sell side M&A transactions across the world that are in preparation or have begun their due diligence stage. These early-stage deals are, on average, six months away from their public announcement. The Intralinks Deal Flow Predictor has been independently verified as an accurate predictor of future changes in the worldwide number of announced M&A transactions, as reported by Thomson Reuters.
