Few saw it coming, given the highly contentious presidential election, but if the highly accurate IntraLinks Holdings Inc. (:ILN/A) Deal Flow Predictor is right, 2016 will see a 3% increase in the total number of M&A deals announced globally compared to FY 2015.
The most recent IntraLinks Deal Flow Predictor, which can be found here, indicates that 2016 announced deals will surpass the previous peak year of 2007.
Q1 2017 Looks Good Too
IntraLinks Deal Flow Predictor also forecasts a 5% increase in the total number of M&A deals to be announced globally in Q1 2017 compared to Q1 2016.
In response to the positive predictions, IntraLinks VP of M&A Strategy and Product Marketing said, “Historically, M&A activity starts to slowdown in Q3 of a U.S. presidential election year, as dealmakers watch closely to see which candidate wins the election and what policies the incoming administration might put into effect. However, this year seems to be an exception, which is surprising given the controversial nature of this year’s presidential election campaign and the unexpected result,”
Where M&A Is Happening
Year-over-year (YoY) growth in early-stage M&A activity in Q3 2016, an indicator of M&A announcements in Q1 2017, grew by 7% globally. This constitutes the fastest rate of growth so far in 2016.
The growth is driven by increased M&A activity in 3 out of 4 global regions - Europe, the Middle East and Africa (EMEA) is up 13%. Asia Pacific (APAC) is up 9% and North America (NA) rose 5%. The foot-dragger is Latin America where early-stage M&A declined 12%.
Sectors To Watch
On a global basis the strongest sectors are Real Estate, Energy & Power and Technology, Media/Entertainment and Telecommunications (TMT). All increased by double-digit percentages in Q3 2016.
Breaking it down by region, in APAC the 3 top sectors going into 2017 will be TMT, Industrials and Healthcare. EMEA expects to see strong activity in Real Estate, Energy & Power and TMT.
LATAM has only one sector – Energy & Power - expected to show growth. As for declines, Healthcare, Consumer & Retail and TMT are predicted to lead that slide in Latin America.
North America expects strong YoY growth in Q1 2017 in Real Estate, Energy & Power and Materials.
All Things Trump
Pundits labeled the 2016 presidential election one of the most controversial ever. Typically controversy, which often carries with it uncertainty, results in slow or no growth. This year has been an exception in almost every way imaginable.
IntraLinks DFP suggests the following possible scenarios moving forward in Q1 2017:
Volatility will decrease – business as usual. Uncertainty is over. In this scenario, M&A will be driven by low economic growth, low inflation and low interest rates.
The beginning of the end of secular stagnation. A shift away from monetary policy to fiscal measures to boost economic growth resulting in a “Trump Boom.”
Increased protectionism and a backlash against corporate tax avoidance. Threats to withdraw from NAFTA and reject TPP. This could result in a slowdown of cross-border M&A.