Intralinks Deal Flow Predictor (DFP) forecasts higher YoY M&A volumes for the next six months, though Latin America looks like it will see deal volume drop

Global merger and acquisition (M&A) volume grew 12.5% in 2014, and Intralinks Deal Flow Predictor (DFP) forecasts that the first half of 2015 will also be up year-on-year, though it could fall below 2H2014 levels.

“We expect to see continued strong growth in announced deals YoY in the first half of 2015, although there will be some significant regional variations,” Intralinks writes in its latest report. “On an industry level, we are seeing the strongest increases in early-stage M&A activity in the Telecommunications, Media & Entertainment (TME), Consumer, and Technology sectors.”

Intralinks M&A Activity Volume

Intralinks forecasts falling M&A volumes in Latin America

Intralinks DFP, which tracks early stage M&A activity that’s usually about six months away from a public announcement, forecasts a 2015 dominated by mid-market M&A deals (EBIDTA between $10 million and $50 million) because the spike in mega-deals ($5 billion or larger) last year leaves fewer economic deals waiting to be made now.

Intralinks expects M&A growth to be dominated by North America and EMEA, with Germany being the main driver for new deals in Europe. Even if the Federal Reserve raises rates this year as most people expect, it’s not expected to interfere with deals since interest rates would still be extremely low in absolute terms; the ECB’s recent decision to start QE will also contribute to European M&A volumes.

Falling commodity prices, including oil and iron, area major problem for some emerging markets and Intralinks says that Mexico and Brazil in particular are no longer good deal-making environments, dragging down expected M&A volumes for the region. The APAC region may be near a peak level of M&A activity, but it should still have plenty of activity.

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M&A activity: Dealmaker sentiment dips, but is still strong

Sentiment dipped slightly from 3Q14 to 4Q14, but overall dealmakers are still quite confident: 55% are optimistic about the deal environment over the next six months, down from 60%, and 64% expect deal volumes to increase over the next six months compared to 69% in 3Q14. 64% said that the number of mega-deals in 2014 is a reasonable sign of the overall health of the market.

“Default rates are very low. Volume is high. Sellers are getting their prices. And buyers are finding ways to still make money, despite the high valuations they are forced to pay,” writes Sponsor Finance, GE Capital CEO Stuart Aronson. “The data flows and economic trends suggest that a down cycle is still a few years off.”