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Global Mergers & Acquisitions Activity Through 3Q16: Zero Percent Growth

Forecast Of Global Mergers & Acquisitions Activity Through 3Q16 by Intralinks

Predicting Deals

Intralinks’ forecast of Thomson Reuters’ future reported volume of announced deals for the next two quarters

The Intralinks Deal Flow Predictor has been independently verified as an accurate predictor of future changes in the global volume (number) of announced M&A transactions, as reported by Thomson Reuters. Quarter-over-quarter (QoQ) percentage changes in the Intralinks Deal Flow Predictor are typically reflected (on average) six months later in announced deal volumes. The Thomson Reuters data on announced deal volumes for the past four quarters has been adjusted by Intralinks for expected subsequent changes in reported announced deal volumes.

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Forecast Of Global Mergers & Acquisitions Activity Through 3Q16 – Introduction

Global early-stage deal activity in Q1 2016 decreased by 0.8 percent year-over-year (YoY1), a sharp reversal from the 7.9 percent growth seen in Q4 2015. This was the first quarter since Q3 2009 that global early-stage mergers & acquisitions activity has shown a YoY decline. While the global headline figure appears to indicate a stalling of dealmaking activity in Q1 2016, there is a remarkable division when looking at the four global regions. In two regions – Asia Pacific (APAC) and Europe, the Middle East & Africa (EMEA) – early-stage mergers & acquisitions activity grew by 9.7 percent and 7.5 percent in Q1 2016, respectively, whereas in Latin America (LATAM) and North America (NA) it declined by 8.1 percent and 9.3 percent, respectively.

In NA, we believe that a combination of factors such as a slowing US economy, declining business confidence, the impact of the December 2015 decision by the US Federal Reserve (Fed) to raise the target range for its key interest rate by 0.25 percentage points (the first increase since June 2006), expected weakness in reported Q1 earnings of US companies and concerns over a deteriorating outlook for global economic growth, have weakened dealmakers’ confidence in initiating M&A transactions. The tight race for the US presidential nomination and uncertainty over the outcome of the election itself, with several of the leading candidates adopting protectionist rhetoric, has also probably contributed to the decline in mergers & acquisitions activity in NA, as dealmakers adopt a risk-off attitude.

In LATAM, the severe economic deterioration in Brazil, the continent’s largest economy, resulting mainly from the slump in commodity and oil prices, combined with a growing political crisis precipitated by the investigation into corruption at state-owned oil company Petrobras, and moves to impeach President Dilma Rousseff, seem to have caused an abrupt halt in mergers & acquisitions activity in Q1 2016 following growth in each of the previous four consecutive quarters.

Meanwhile, in EMEA and APAC dealmaking confidence appears to be holding up well in Q1 2016 with the notable exceptions of Germany and Australia, where early-stage mergers & acquisitions activity declined by 8.4 percent and 22.1 percent, respectively. Both countries have been affected by the economic slowdown in China. Weaker Chinese economic growth has caused decreased demand for Australian export commodities such as coal and iron ore, as well as lower exports of Germanmade finished and capital goods such as machine tools. In the UK, dealmakers appear to be becoming more cautious: while early-stage mergers & acquisitions activity increased by 3 percent, confounding predictions by some commentators that uncertainty ahead of the EU membership referendum in June would lead to an evaporation of mergers & acquisitionsA activity, this was a significantly slower rate of growth than in the previous quarter.

Looking globally at early-stage mergers & acquisitions activity by sector, only the Industrials and Materials sectors showed increases in early-stage deal flow in Q1 2016.

Our key predictions for the next six months

The number of global announced M&A deals in the first nine months of 2016 will be approximately the same as the comparable period in 2015. The mid-point of our forecast is for zero percent growth, with a range between -1.2 percent and +1.2 percent. Compared to last quarter, we are seeing a decline, globally overall, in early-stage mergers & acquisitions activity and the possibility exists that the full year 2016 will see a lower number of announced M&A deals than 2015.

In APAC, announced mergers & acquisitions activity will continue to increase from 2015 levels as dealmakers target acquisitions to benefit from the regions’ fast-growing economies and growing middle class, despite the effects on the region from a slowdown in Chinese economic growth.

Announced mergers & acquisitions activity will remain robust in most of EMEA as recovering economies and quantitative easing measures by the European Central Bank continue to support strong levels of mergers & acquisitions activity. Dealmakers targeting the UK will, however, become more cautious due to uncertainty surrounding the approaching UK EU membership referendum in June and the possibility of a destabilizing “Brexit” decision.

In LATAM, weakened global demand for commodities, low oil prices, collapsing investment and constrained government spending, combined with the uncertainty caused by the growing Brazilian political crisis, will act as a drag on mergers & acquisitions activity.

In NA, dealmaking confidence will weaken and any shocks to the system such as further increases in interest rates, weak US corporate earnings, declines in equity markets and further evidence of slowing economic growth will have a negative impact on mergers & acquisitions activity.

Overview

First indications of a global M&A slow down

The latest Intralinks Deal Flow Predictor data shows that global early-stage mergers & acquisitions activity in Q1 2016 decreased by 0.8 percent YoY. Pessimists would argue that this is the first sign of the M&A market cooling down. Dealmakers are experiencing a slow-down of activity, driven primarily by the ever-slowing and increasingly fragile pace of the global economic recovery, exacerbated by weak commodity and oil prices, the impact from a slowing Chinese economy and evidence of weakness in economic activity in emerging markets. That said, the data also shows very significant regional differences on a much more pronounced scale than in recent Intralinks Deal Flow Predictor reports, with EMEA and APAC still showing relatively robust growth in early-stage mergers & acquisitions activity in Q1 2016 compared to equally significant declines in NA and LATAM.

Corporate executives continue to face the same challenge they faced over the course of 2015, namely having to find ways to grow in a weak economic environment with low inflation. At the same time, private equity practitioners face the dual challenge of having to deploy capital and looking for exit opportunities for some of their older portfolio companies. The pressure to continue to do deals in this type of environment can outweigh nervousness over a weaker than expected global economy and the occasional shocks such as economic news from China or equity and bond market jitters.

North America – the Trump effect?

In the US, the Fed’s interest rate rise in December 2015 was received calmly and seemed to have no discernible impact on early-stage mergers & acquisitions activity in Q4 2015. However, as the November 2016 US Presidential election draws closer and Donald Trump’s march toward winning the Republican nomination continues, our latest Intralinks Global M&A Sentiment Survey suggests that dealmakers may be reticent to initiate new transactions out of concern that the US might end up with a President Trump. In fact, early-stage M&A activity in NA declined by 9.3 percent in Q1 2016. We believe that headwinds from a slowing US and global economy, declining business confidence, fears over the impact of further Fed increases in interest rates in 2016 and expectations for a profit recession from corporate America with the Q1 corporate earnings season (which commences in April), have weakened dealmakers’ confidence in initiating M&A transactions.

Europe, the Middle East and Africa – mostly strong, with a few exceptions

Overall, EMEA continues to show relatively robust levels of growth in early-stage deal activity in Q1 2016, advancing by 7.5 percent YoY.

Somewhat surprisingly and in contrast to what we saw in Q4 2015, early stage M&A activity in Germany declined by 8.4 percent in Q1 2016. The level of early-stage M&A activity in Germany has been volatile over the past four quarters, with consecutive declines in Q2 and Q3 2015 of around 8 percent, followed by an 8 percent increase in Q4 2015. Germany, as a leading exporter of capital goods, is feeling the impact of the slowdown in demand from China. In addition, a political backlash against German Chancellor Angela Merkel’s “open door policy” when it comes to migration has resulted in her party losing ground in recent state elections, adding to the sense of unease among dealmakers targeting Europe’s largest economy.

In the UK, as the date of the EU membership referendum draws closer, fierce political divisions within the ruling Conservative party over the issue and infighting among members of the government appear to be having a dampening effect on dealmaking confidence. UK early-stage mergers & acquisitions activity increased by only 3 percent in Q1 2016, a significantly slower rate of growth than we saw in Q4 2015.

Asia Pacific – continuing to grow, despite China slowdown, Australia still declining

Asia-Pacific overall is continuing to show healthy growth in early-stage mergers & acquisitions activity in Q1 2016, with the Intralinks Deal Flow Predictor showing activity levels as being up 9.7 percent. The impact of the slowdown in Chinese economic growth and the concurrent correction in Chinese equity markets that began in the summer of 2015 appear to have been largely forgotten.

All of the region’s major economies, with the notable exception of Australia, are enjoying doubledigit growth in early-stage deal flow. Australia, however, remains mired in an M&A recession with early-stage mergers & acquisitions activity down 22.1 percent in Q1 2016, the fourth consecutive quarter of negative or zero growth. We have previously explained “The Lucky Country’s” M&A downturn as largely due to its historic dependency on the Metals and Mining sector, which has been hit hard by the collapse in commodity prices, along with a reliance on China as an inbound M&A investor. However, the question now is what local dealmakers will do to encourage deal activity and make up for the shortfall. Intralinks’ Global M&A Sentiment Survey, which polled 1,500 dealmakers in April 2016, including 100 respondents from Australia, found that 45 percent of Australian M&A professionals expect to participate in more M&A deals over the next six months compared with the last six months, with the Energy & Power sector expected to be the most active.

In this edition of the Intralinks Deal Flow Predictor, our spotlight feature provides additional focus on Japan and its continued strong performance in outbound dealmaking. Japanese corporates are grabbing headlines with the audacity of their dealmaking, their speed of execution and the high premiums they are willing to pay. Recent activity is causing commentators to draw comparisons with the acquisition sprees of the 1980s. However, it is important to point out that the current wave of dealmaking from Japan is anchored in a different economic reality, with executives recognizing that they will not be able to achieve sustainable growth in their home market.

Meanwhile Chinese companies also remain busy on the acquisition trail with a number of highprofile transactions coming to market in the first quarter of 2016, including ChinaChem’s double acquisition of German plastics machinery maker KraussMaffei and Swiss agrochemicals and seeds producer Syngenta. However, Chinese outbound dealmaking aspirations have not been without their challenges, as Anbang, the ambitious Chinese insurance company, found out to its detriment. After leading a consortium of bidders to present what it thought was a knockout bid for US hotel operator Starwood, in competition with hotel competitor Marriott, Anbang withdrew its offer at the eleventh hour, explaining the withdrawal as being due to “various market considerations.” However, media reports widely suggested that Chinese regulators had in fact clipped the bidder’s wings, providing unique insight into how Chinese dealmaking is viewed back home and raising concerns among global acquisition targets and bankers as to how credible Chinese bidders will be viewed in the future. Following the Anbang affair, more Chinese bidders may have to overpay for assets to compensate for the uncertainty of whether transactions will close, or offer a hefty break fee to assuage sellers’ concerns.

Latin America – Brazil woes fuel negative sentiment

Back in Q1 2015, we predicted the return of increased dealmaking in Latin America, as we reported an uptick in Brazilian early-stage mergers & acquisitions activity for the first time in six quarters. Sadly, the first quarter of 2016 saw a setback with early-stage mergers & acquisitions activity dropping by 8.1 percent YoY. Attractive demographics, along with an emerging middle class with increasing disposable income, should make LATAM an increasingly attractive investment destination, particularly for players in the consumer products space. However, the underlying challenges of the region – weak economies hit hard by the collapse in commodity and oil prices, political instability, corruption and now the Zika virus outbreak – can dampen the aspirations of even the most longterm of investors.

Regional Snapshot

Early-stage M&A activity across the world

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The Intralinks Mid-Market Monitor

Deal opportunities on Intralinks Dealnexus

The Intralinks Mid-Market Monitor provides a quarterly snapshot of M&A opportunities on1 Intralinks Dealnexus®, the largest global online deal sourcing and M&A social network, exclusively for M&A professionals. With over 1,300 new, actionable M&A opportunities created and securely marketed on Intralinks Dealnexus in Q1 2016, the Intralinks Mid-Market Monitor represents over 10 percent of global announced deal volume.

The chart below shows the cumulative number of deal opportunities and their total revenue value added to Intralinks Dealnexus since Q1 2013, highlighting the growing number of corporates, PE firms and advisors using Intralinks Dealnexus to discretely market their deal opportunities to a global network of vetted buyers and investors. The charts on the next page show the percentage of deal opportunities by sector added to Intralinks Dealnexus in Q1 2016, highlighting the sectors that are seeing the most activity on Intralinks Dealnexus in Q1 2016. The table on the page after that shows the top five opportunities by region and revenue on the Intralinks Dealnexus public deal marketplace as of the end of Q1 2016

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Percentage of deal opportunities by sector marketed on Intralinks Dealnexus in Q1 2016

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Top 5 opportunities by region and revenue5 on the Intralinks Dealnexus public deal marketplace as of the end of Q1 2016

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Spotlight: Japan

Corporate Japan made headlines in July 2015 when media player Nikkei swooped in at the eleventh hour to snatch the pink paper – the Financial Times – out of the hands of German newspaper giant Axel Springer. The deal fittingly dominated headlines in the Financial Times and other business pages, for a number of reasons: the sheer audacity of it, the speed with which it was executed and the high premium being the most noteworthy.

Over the past few years, Japanese players have slowly and quietly been changing the way they do deals, to the point that they are now a force to be reckoned with. In fact, the Nikkei / Financial Times deal was just the most recent in a long list of M&A transactions by Japanese players that are causing commentators to draw comparisons to the wave of deals that saw corporate Japan take control of high profile US assets such as the Rockefeller Center and Columbia Pictures in the 1980s.

Many of the deals in the 1980s were considered vanity exercises, means for Japanese companies to demonstrate that they too could play in the big leagues. Recent deals are more anchored in economic reality with executives recognizing that they will not be able to achieve sustainable growth in their home market. Japanese companies are faced with the same challenges as many of their international competitors when it comes to achieving growth: low domestic economic growth and low inflation or even deflation. However, the country’s rapidly aging population and its implications for future economic growth make Japanese corporate growth targets an even more fundamental challenge. In order to achieve any long term, sustainable growth, it is an economic necessity for Japanese companies to look overseas for growth opportunities.

While it is true that the recent uptick in outbound mergers & acquisitions activity began before the introduction of Prime Minister Shinzo Abe’s “Abenomics” program of economic stimulus measures, his new emphasis on raising Japan’s economic growth rate has put companies under increased pressure to raise their returns on equity and address their significant stockpiles of cash. According to the Bank of Japan, Japanese companies are sitting on cash reserves close to US$2 trillion. These significant war chests have allowed Japanese buyers to engage in sizable transactions without taking on debt, while at the same time paying significant premiums that beat the offerings of more cautious bidders. The aforementioned Nikkei / FT deal is a case in point – Nikkei paid an estimated multiple of 35x EBIT.

In addition to the changed attitude towards doing deals, deal know-how has also improved, contributing to the increased success rate with which Japanese corporates are engaging in outbound M&A transactions. Just a few years ago, Japanese buyers were mentioned in the same breath as Chinese and Indian buyers: eager to start negotiations but not always able to clinch the deal.

So, the newfound speed and ease with which the Japanese are executing deals is noteworthy. Like many Chinese players, Japanese acquirers have in the past been thwarted by their slowness and different cultural outlook in dealmaking. Japan’s consensus-driven approach – involving many parties within the organization in the acquisition process – has at times slowed Japanese companies down to the point of losing deals. However, observers note that many more Japanese corporates now have in-house M&A teams and retained advisers, allowing them to work at a similar speed to Western players. At the same time, the trend towards longer and more thorough due diligence processes plays into the hands of detail-oriented and diligent Japanese buyers.

Players in sectors that will be heavily affected by the declining population – consumer goods and retail, but also financial services and insurance – are particularly interested in doing deals overseas. What they are looking for is assured growth in solid markets. Looking ahead, consumer goods and healthcare are set to be sectors to watch with beer maker Asahi and frozen foods and seasonings maker Ajinomoto rumored to be in acquisition mode.

Japan’s outbound mergers & acquisitions activity is not occurring in isolation; it comes at a time when M&A activity overall in Japan is seeing something of a renaissance. The insurance space is just one example of increased domestic activity. Further, domestic consolidation is considered a precursor to outbound deal activity, for example when it led to Tokio Marine buying US insurance provider HCC in June 2015 in a deal worth US$7.5bn, the largest in a long line of deals in the space. Similar plays have occurred in consumer electronics and regional banking, with camera maker Canon being another headline-grabbing player in its acquisition of Axis, the Swedish network video solutions company, in February 2015.

One criticism that has frequently been leveled at Japanese buyers when doing deals overseas is that they overpay on assets. According to Thomson Reuters, the median premium paid by Japanese acquirers in cross-border deals over the past 10 years is 27.5 percent, compared to 17.7 percent for US cross-border acquirers. The counter-argument is that Japanese buyers are playing the long game and are, therefore, willing to take criticism now over what they have paid for assets that they expect will provide them with long-term benefits. However, going forward it remains to be seen how much longer Japanese buyers can appease critics with this explanation.

Deal financing is an overall concern as, looking ahead, the biggest challenge to Japanese outbound ambitions is the weakening of the Yen, which has already made a number of deals more costly than dealmakers initially intended, even if it has not yet sunk a deal. Hitachi’s chief executive Hiroaki Nakanishi was quoted in the Wall Street Journal as saying it was a shame that the price for Ansaldo, Finmeccanica’s rail and traffics signaling business, which Hitachi bought in February 2015, went up in part due to the weakening Yen. And, while Japanese coffers appear deep and shareholders of Japanese companies seem willing to support the buying bonanza, there could well come a point at which deals simply become too expensive to stomach.

Furthermore, in Japan too, practitioners are taking an increasingly gloomy outlook on the future development of the M&A market. As in many other jurisdictions, there is talk of a developing price bubble that could end up having a negative impact on mergers & acquisitions activity, as well as rumblings that the upward trajectory of the previous years could end soon.

For the time being, however, Japanese players are enjoying a great run in the M&A game. Their ambitions when it comes to dealmaking are only second to that of their Asian neighbor China and, with companies as diverse as advertiser Dentsu, Japan Post and Japan Tobacco all on the lookout for acquisitions, the next few months should be very interesting indeed.

Guest Comment

Risk management solutions for M&A

For this issue of the Intralinks Deal Flow Predictor, Intralinks (IL) interviewed Gaurav Sud (GS), Managing Director of Aon Transaction Solutions, on the topic of risk management solutions for M&A transactions.

Prior to joining Aon’s Transaction Solutions team in 2014, Gaurav was an Associate at Fenwick & West LLP in Silicon Valley (from 2011 to 2014) and Shearman & Sterling LLP in New York (from 2007 to 2011), specializing in public and private M&A, private equity and venture capital investment transactions and other strategic corporate transactions, as well as fund formation and corporate governance matters for private equity sponsors and US and global strategic clients spanning a wide range of industries. Prior to attending law school, Gaurav was an M&A paralegal at Wachtell, Lipton, Rosen & Katz in New York. He holds a J.D. from Vanderbilt University Law School and a B.A. in English from Amherst College. He is a member of the bar in both New York and California.

IL: What exactly is M&A insurance and which types of risks in an M&A transaction can be insured?

GS: The basic principle of M&A insurance is to use insurance capital to absorb risks inherent in a transaction that would otherwise be allocated to the buyer or to the seller via contractual indemnification, escrow, holdback or other similar mechanisms. Its purpose is to reimburse either a buyer or a seller for damages flowing from contingent liabilities. It can address both known risks, such a tax liabilities, environmental concerns and others, and also unknown risks that go to the crux of why representations and warranties and accompanying disclosure schedules are among the most heavily negotiated aspects of an M&A transaction agreement.

IL: Could you highlight the differences between relying on M&A insurance versus traditional solutions such as escrow and some of the advantages vs. disadvantages of this tool?

GS: M&A insurance as it exists today really replicates a traditional structured indemnity much more closely than it ever has before, both in terms of substance of the coverage and process for bringing a claim. Moreover, the coverage that can be negotiated in these policies today as a general matter is more robust than what many buyers are able to extract from sellers in arm’slength negotiations. Having said that, assuming the buyer is being insured, the underwriting of these risks does build directly upon the legal, financial and other due diligence processes and findings of the buyer. As a result of this underwriting process and also an insurer’s concern with moral hazard, there is an “anti-sandbagging” overlay to all of these policies that may or may not exist in a transaction negotiated without the insurance, the language of which must be monitored closely by the transaction parties and their counsel.

IL: Which parties in an M&A transaction might want to buy M&A insurance?

GS: It can insure either party in an M&A process, buyer or seller. However, the vast majority of our policies today insure the buyer and serve as either the primary or potentially the exclusive means of recourse.

IL: What are the buyers of M&A insurance typically seeking to achieve?

GS: In today’s market, the primary aim is to create a more efficient and cash accretive transaction structure for both parties, effectively finding and creating value within the deal. Historically, these policies had been used to de-risk a transaction or bridge gaps in the buyer’s and seller’s expectations when it came to the treatment of contingent liabilities, but the explosive growth of M&A insurance in recent years is really attributable to the fact that they are being used as a strategic tool that allows the policy holder to use deal dynamics to its advantage and deal with contingent liabilities in a financially more efficient way.

IL: How can M&A insurance benefit the deal and those parties who choose to use it?

GS: By using it strategically, M&A insurance can replace a structured indemnity or traditional escrow construct with a tool that allows for a smoother and more financially efficient transaction process.

IL: What does the process for buying an M&A insurance policy look like and how does it affect the timetable and other dynamics of the deal?

GS: Underwriting and placing an M&A insurance policy undoubtedly adds another step or process to an M&A transaction but it does not add time into the process as the bulk of this process can and does happen in parallel to the other work streams. It typically takes about two weeks to put a policy into place and that typically happens in three phases. Phase one is testing the market and getting a read for the appetite, possible pricing and making sure there are solutions out there. This usually takes four to five days. In phase two, we engage an underwriter and facilitate their underwriting of the target business, which generally takes between five and seven days. Negotiating a policy document that tracks the purchase agreement is phase three and that usually takes two to three days. Though we are now being engaged earlier and earlier in the process, with increased adoption rates across the market, you really want to make sure you have the process started around two to three weeks before the anticipated deal signing.

IL: How has the market for M&A insurance developed and what is the current size of the market in terms of the number of deals using M&A insurance?

GS: The market has seen tremendous growth over the past 12 to 18 months and we are increasingly seeing it as part of the M&A tool kit in very sophisticated transactions, not just in the private equity sphere but most notably also among strategic acquirers. Over this time period, the field of dedicated carriers who provide M&A insurance has doubled from six to thirteen, with at least another three or four more preparing to break into the market likely later this year. Given that these are almost exclusively private transactions, we are forced to estimate and extrapolate based upon our own book, but we believe that M&A insurance is touching somewhere between 15 percent and 18 percent of the private M&A middle market (and something considerably higher than that if you narrow the sample size to sponsor-to-sponsor transactions), up from less than 1 percent just a few years ago. So, M&A insurance has gone from being a marginal, niche tool, seen as the last resort, to, if not quite mainstream, certainly on its way.

IL: What types of deals are typically using M&A insurance products?

GS: The reality is that M&A insurance “grew up” within the PE community, as it initially played well with the PE mindset of boxing in risk and finding arbitrage opportunities. That said, just about one third of our book last year involved transactions where a strategic buyer was being insured. As corporates are increasingly seeing themselves in competitive situations or auctions, they too are drawing on this solution – and they are doing so not just in those competitive situations but also in proprietary, privately negotiated deals – and they are finding the same arbitrage opportunities that first drew the PE community to these types of policies five to six years ago.

IL: Are M&A insurance products becoming more standardized or are these still very much bespoke solutions?

GS: Currently, M&A insurance remains a highly negotiated and customized product. However, in the US, most law firms have developed standardized forms with a preferred carrier or several carriers that are then tailored to fit the deal, so there is some degree of standardization taking place as well, even though the nuances of every policy negotiation remain very particular to the deal at hand.

IL: Are there any regional differences in the use or acceptance of M&A insurance products, and if so what are the reasons behind these?

GS: Yes, there are quite significant regional differences. In the UK and Australia in particular, we see very high adoption rates, with 80 percent to 90 percent of the M&A landscape using M&A insurance as a tool. From there, the use of M&A insurance has spread into some European jurisdictions but by no means all. In the US, it started off very much as a New York- and East Coast-centric tool and is now slowly working its way across the country.

IL: Can you give an outlook on the future of M&A insurance, both in terms of growth and new products and innovation?

GS: We see a huge amount of potential and greenfield for M&A insurance as a product and as a tool to facilitate an M&A process. The challenge will be to find the right balance of needing to become more standardized and yet remaining bespoke enough to meet the needs of each individual deal. What excites us is that there are many more deals out there that would benefit from M&A insurance and opportunities to have conversations with very sophisticated deal professionals who are often learning about these products for the first time, at least in their current iteration. Further, we are excited about the potential for innovation and expansion into new areas. Not only are there many opportunities to educate practitioners on how best to use M&A insurance, but we are also continually learning from those practitioners about new and difficult problems they may be encountering that we may be able to help solve. The market has matured to a place where we can address some very complex risks that would otherwise be the subject of protracted indemnification discussions between transaction parties.

IL: Gaurav, many thanks for sharing your insights with our readers.

Sentiment Survey

The quarterly Intralinks Global M&A Sentiment Survey polled dealmakers during April 2016 and received a total of 1,500 responses.

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Dealmakers in APAC, EMEA, and NA are most concerned about a global economic slowdown having an impact on mergers & acquisitions activity in their regions over the next six months, whereas dealmakers in  LATAM expect commodity and energy prices and monetary policy to have the most significant impact on M&A activity in their region over the next six months.

In NA, 73 percent of respondents believe that, if elected, Bernie Sanders will have a negative impact on mergers & acquisitions activity in their region, whereas 46 percent of respondents believe that, if elected, Donald Trump will have a negative impact on M&A activity in their region.

In EMEA, 87 percent of respondents believe that a vote by the UK to leave the EU will have an impact on M&A activity in the UK and/or Europe, and, of those, 83 percent think it will have a negative impact.

The Intralinks Deal Flow Predictor provides Intralinks’ perspective on the level of early-stage mergers & acquisitions activity taking place during any given period of time.

The statistics contained in this report reflect the volume of VDRs opened, or proposed to be opened, through Intralinks or other providers for the purpose of conducting due diligence on proposed transactions, including asset sales, divestitures, equity private placements, financings, capital raises, joint ventures, alliances and partnerships. These statistics are not adjusted for changes in Intralinks’ share of the VDR market or changes in market demand for VDR services. These statistics may not correlate to the volume of completed transactions reported by market data providers and should not be construed to represent the volume of transactions ultimately consummated during any period of time.

Indications of future completed deal activity derived from the Intralinks Deal Flow Predictor are based on assumed rates of deals going from diligence stage to completion. In addition, the statistics provided by market data providers regarding announced M&A transactions may be compiled with a different set of transaction types.

To verify the predictive nature of the Intralinks Deal Flow Predictor, we compared the data underlying the Intralinks Deal Flow Predictor with subsequent announced deal volume data reported by Thomson Reuters to build an econometric model (using standard statistical techniques appropriate for estimating a linear regression model) to predict the future reported volume of announced M&A transactions two quarters ahead, as recorded by Thomson Reuters. We engaged Decision Economics Inc., an independent global economic and financial markets research and consulting firm, to assess, replicate and evaluate this model. Decision Economics’ analysis showed that our prediction model has a very high level of statistical significance, with a more than 99.9 percent probability that the Intralinks Deal Flow Predictor is a statistically significant six-month predictive indicator of announced deal data, as subsequently reported by Thomson Reuters. We plan to periodically update the independent statistical analysis to confirm the Intralinks Deal Flow Predictor’s continuing validity as a predictor of future mergers & acquisitions activity.

The Intralinks Deal Flow Predictor report is provided “as is” for informational purposes only. Intralinks makes no guarantee, regarding the timeliness, accuracy or completeness of the content of the report. This report is based on Intralinks’ observations and subjective interpretations of due diligence activity taking place, or proposed to take place, on Intralinks’ or other providers’ VDR platforms for a limited set of transaction types. This report is not intended to be an indicator of Intralinks’ business performance or operating results for any prior or future period. This report is not intended to convey investment advice or solicit investments of any kind whatsoever.

About Intralinks

Intralinks Holdings, Inc. (NYSE: IL) is a leading, global technology provider of secure enterprise content collaboration solutions. For more information, visit www.intralinks.com.