Mergers and acquisitions continue across multiple sectors this year as various industries consolidate, and it looks like this year could be a record year for global MA& activity. Intralinks released the latest edition of its Deal Flow Predictor report this morning, and the firm forecasts 9% to 14% increase in M&A volumes for the full year.
The results echo comments made recently by Gregg Lemkau of Goldman Sachs.
1H 2015 busy for M&A
The first half of this year was quite robust in terms of early-state activities, and Intralinks expects a similar trend in the second half of this year with an 8% increase in M&A volumes compared to last year. Intralinks M&A Strategy Vice President Matt Porzio said an 11% increase this year would be flat with last year’s growth rate. Here’s a look at historical M&A activity and this year’s projections, according to Intralinks (All graphs/ charts in this article are courtesy Intralinks.):
He also said that M&A activities in Latin America are not going strong, but the rest of the world should more than make up for that, probably resulting in “an M&A boom year.”
Regionally, the Asia Pacific region is showing the biggest increase in early-state M&A activity so far this year at a 16% growth rate. This means that the number of announced mergers in the region this year should “significantly” surpass last year’s number.
Also North America, Europe, and the Middle East and Africa have so far recorded a 10% growth rate in M&A activity this year. Latin America’s growth rate is just 0.5%, although that’s still an improvement, as the region hasn’t seen an increase in early-state M&A activity over two quarters since the fourth quarter of 2013.
Consumer Products & Services lead M&A activity
According to Intralinks, the Consumer Products & Services, High Technology, Retail, Media & Entertainment, and Real Estate sectors are showing the strongest increases in early-state M&A activity. On the other side of the spectrum, the Energy & Power, Industrials, and Mining sectors are showing the biggest declines in early stage activity.
Porzio said in the report that it appears as if “cheap financing options” plus aspirations of growth seem to be impacting companies’ decisions to seek out and consider M&As.
Dealmakers remain positive
Intralinks also conducted a survey of 500 M&A professionals during the second quarter to gauge optimism and other metrics. They found that 51% of global dealmakers remain positive about the M&A environment right now, which is a decline from the previous quarter’s survey, which indicated that 60% were optimistic. Zeroing in by region, they learned that sentiment varies widely across different areas. For example, 58% of North American respondents said they were optimistic, compared to just 29% of Latin American participants.
Further, they learned that 57% of dealmakers plan to take part in more deals than they did at the beginning of the year and 59% expect the overall number of deals to rise.
Perhaps one of the reasons dealmakers are so optimistic is that the valuations of deals are expected to hit a new high as well. Investors have been concerned about a price bubble, as average U.S. deal valuations hit 16 times EBITDA, setting a new record. The previous record was set in 2007 at 14.3 times EBITDA.