M&A: a Continuing Trend According To Survey

In one recent development, Intralinks, a provider of virtual data rooms that support mergers and acquisitions, has announced a new software package that centralizes merger and acquisitions deal tracking and reporting. In another, Intralinks has expressed its confidence that M&A activity will increase through the 2d quarter in much of the world. That presumably makes this a good time to introduce a product of this sort.

So let’s start with the product announcement. The product, known as Intralinks Dealmanager, aims at corporate development professionals, offering them what the company calls a “secure system of record that corporate development professionals can rely on every day to manage early stage opportunities, the due diligence process, and other pre- and post-merger activities.”

The Survey Says

The company has also released data from a recent survey of such corporate development professionals, a study that indicates that such a product satisfies a considerable demand.

Only 18% of mergers and acquisition professionals say that their current method of tracking deals is “very effective.”

Just over half say that the chief reason for inadequate deal management is that the data are housed in disparate places.

More than three-quarters said that they have worries about the security of the way data is stored and shared within their organization.

Professionals don’t always practice what they preach. Though 61% see accidental leaks of data from insiders to third parties as their organizations single biggest security risk, 40% report themselves sharing regulated information about M&A deals with … third parties.

So much for the product and its potential buyers: In other Intralinks news …the company has announced that its Deal Flow Predictor says the global M&A market will continue to show strength through the first half of 2015. DFP, an indicator of early-stage activity, tells Intralinks that the second quarter will show a 1% quarter-to-quarter increase, and “particularly strong performances in Europe, Middle East, and Africa (EMEA) and North America.”

2014’s Growth in M&A Will Continue

Matt Porzio, vice president of M&A strategy and product marketing, has said that M&A “saw a return to significant growth [in 2014], for the first time since 2010, both in terms of deal volume and value.” It appears that trend will continue.

In North America, the drivers of this trend include continued strength in the underlying economy, low interest rates, and pressures on corporate honchos to generate growth in a low inflation environment.

The report doesn’t mention (because it was prepared too early to mention) Richard Fisher’s final speech as president of the Dallas Fed. On March 9th, Fisher addressed the Baker Institute for Public Policy, Rice University.

Fisher displayed a “dashboard” used at the Dallas Fed to visualize the state of the U.S. economy. The indicators look good – in this he is in agreement with Intralinks, there is a lot of deal-driving growth underway. But … Fisher’s conclusion is that the Fed ought to raise interest rates.

Source: Dallas Fed

Or, in Fisher’s terms, “I have argued that we should begin reducing policy accommodation earlier than many of my colleagues on the FOMC appear to prefer.” To his mind, deferring rate increases as long as until January 2016 is a dangerous wait.

Fisher remains, though, something of a voice in the wilderness. The Fed has since deleted the word “patient” form its pronouncements in order to sound hawkish, while including other language so it would still sound dovish. No real interest-rate hike seems likely.

Back at the Ranch

So let us get back to the round-up of world regions as Intralinks sees them. In EMEA, the trend toward more M&A activity is stronger than it is in North America. In EMEA, it is driven primarily by safe haven countries such as Germany, but other countries, such as France, Italy, and Spain, are on the rebound and will make their own contributions to the trend.

In Latin America, on the other hand, the deal-making environment is still weak. Indicators are that activity will decline 9% quarter-on-quarter going into the 2Q. Prices for key mineral exports are hurting the underlying economy in Brazil and Mexico in particular. This is part of a bigger picture; the “commodity price super cycle which was fueled by Chinese industrialization” is drawing to a close.

Oil prices in particular fell nearly 50% in the eight months beginning with June 2014, and this may have made North American producers [U.S. shale and/or Canadian oil sands] the possessors of the whip hand in the fossil fuel world for now, which may help drive deals in those two countries but will do nothing of the sort south of the Rio Grande.

 

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