The big takeaway from the most recent Intralinks Holdings Inc.’s (NYSE: IL) Deal Flow Predictor is that the first half of 2017 is expected to set a record for annual global announced M&A deals. That’s the good news. The not-so-good news is that North America (NA) will see a decline.
The Intralinks Deal Flow Predictor has a proven track record of providing an accurate prediction of future global M&A activity based on the number virtual data rooms (VDRs) opened, or proposed to be opened, through Intralinks or other providers.
Related: ANOTHER BIG MERGER BITES THE DUST
The Immediate Future Is Rosy
According to the Intralinks DFP, there will be a 6% increase in total globally announced M&A deals in 1H 2017 compared to 1H 2016.
“The fact that the rate of growth in early-stage M&A activity in Q4 2016 remained steady despite the (unexpected) victory of Donald Trump in the U.S. presidential election and the (expected) decision of the U.S. Federal Reserve to increase the target range for the federal funds rate by ¼ of a percentage point, suggests that deal making confidence remains high,” said Matt Porzio, Vice President of M&A Strategy and Product Marketing at Intralinks.
Porzio attributes this high confidence to the forces powering M&A activity over the past 3 years - a global environment of low inflation, below-trend economic growth and ultra-low interest rates.
Regional Historical Perspective
Year-over-year (YoY) M&A activity growth Q4 2016, which provides the data behind predictions for Q2 2017, grew 7% globally. Activity was up in 3 out of 4 global regions.
M&A activity in Asia Pacific (APAC) grew 44%; Latin America (LATAM) showed an increase of 11% and Europe, the Middle East and Africa (EMEA) rose 9% during the period. North America (NA) showed the only decline, a 5% drop in early-state M&A activity.
Looking Ahead On The Plus Side
Using past as prelude, the Intralinks DFP predicts Q2 2017 M&A announcements in APAC will increase YoY. Strongest M&A growth is expected in Indian, Southeast Asia and Japan. Sector-wise most of the growth will come in Financials, Consumer & Retail and Healthcare, according to Intralinks.
Announcements in EMEA and LATAM are also expected to increase. In EMEA, growth will come mostly from France, Spain, Germany and Eastern Europe. Top sectors will be Consumer & Retail, TMT (Technology, Media and Telecoms) and Energy & Power. Growth in LATAM will be most evident in Argentina and Mexico with the strongest sectors, Healthcare and Real Estate.
That Troublesome North American Lag
The decline in North America will be led by fewer announcements in Consumer & Retail, Industrials and Energy & Power. Materials, Financials and Healthcare, however, should show an increase in M&A announcements.
Reasons for past and expected continuing decline have been widely discussed. Canada’s Q4 2016 13% drop in deal activity was the product of a sharp decline in the Energy and Mining sectors producing a 4-year slump in commodity prices. Dealmakers in the U.S. remain nervous about President Donald Trump’s promises to pursue a nationalist, protectionist and anti-globalization agenda. For more download the entire Intralinks Deal Flow Predictor report here.