The latest IntraLinks Deal Flow Predictor, released Nov. 16, forecasts that worldwide M&A announced deals in Q1 2018 will increase by 2% compared to Q1 2017. Deals in North America, however, are expected to drop 11%.
Related: WHY M&A DEALS FAIL
Behind The Findings
The anticipated global growth in M&A is 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,” according to a statement from IntraLinks.
Philip Whitchelo, VP of Strategy & Product Marketing at IntraLinks addressed potential risks saying in a statement, “The risks to the scenario of steadily increasing M&A activity are twofold: political and financial. Increases in economic nationalism, protectionism and restrictions on global trade and cross-border economic integration all have the potential to negatively affect deal making 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 deal making confidence.”
The North American Conundrum
Behind an anticipated 11% drop in M&A deals in North America in Q1 2018 are two key factors. First, Q1 2017, the comparison period, was exceptionally strong in North America. Despite the number of announced M&A deals in NA in 2017, early-stage deal activity in Q3 fell by 7% year over year (YOY).
IntraLinks suggests 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. There’s also the increasing cost of money as the U.S. Federal Reserve begins to raise interest rates.
Meanwhile, the latest DFP sees year-over-year growth in the number of announced M&A deals in the remaining regions. Asia Pacific (APAC) is predicted to be up around 14%; Europe, the Middle East and Africa (EMEA), is expected to be up around 6%; and Latin America (LATAM), should be up about 3% in Q1 of the new year.
In APAC, all regions have indicated increased volumes of early-stage M&A activity with Southeast Asia, India and North Asia (China, Hong Kong and South Korea) showing the strongest growth. In EMEA, two of the region’s largest M&A markets, the UK and Germany, showed YOY declines of 5% and 10% respectively in Q3 2017. Despite this the rest of the region looks solid. LATAM has shown increased early-stage YOY M&A activity for the fourth consecutive quarter, effectively confirming the region’s return to growth.
About The IntraLinks DFP
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. To access the most current IntraLinks Deal Flow Predictor go here.