M&A Deal Flow in 2018
By Generational Equity
01/08/2018
One of the most important questions nearly every player in the M&A industry is focusing on is this: Just how long will the current seller’s market continue?
Fortunately, we are at a point in the calendar when forecasters, analysts, and pundits are postulating the answer to this very question.
One of the most reliable sources of projected M&A activity we have found is Intralinks and their “Deal Flow Predictor – DFP.” Historically, when compared to actual deal announcements, their DFP has proven to be very accurate in predicting future M&A activity. And according to their latest quarterly update, here is why:
Intralinks is the leading global provider of Virtual Data Rooms (VDRs), for buy-side and sell-side M&A deal management and has been in business for over 20 years. Our involvement in the early stages of a significant percentage of the world’s M&A transactions gives us unique insight into the expected volume of future announced M&A deals. The Intralinks Deal Flow Predictor forecasts the volume of future M&A announcements by tracking early-stage M&A activity – sell-side M&A transactions around the world that are in preparation or have begun their due diligence stage.
What makes the DFP from Intralinks unique among most M&A forecasting tools is that it provides us with a snapshot of activity months in advance of deals closing, since these early-stage deals are, on average, six months away from their public announcement of closing.
They recently released their report estimating deal activity through the first quarter of 2018. Here is a summary of their findings:
The number of worldwide announced M&A deals is set for a fourth consecutive year of growth in 2017, driven by an extraordinary surge in dealmaking in North America (NA) that began in Q4 2016, following the election of US President Donald Trump. According to data from Thomson Reuters and Intralinks’ own analysis, the number of announced deals in NA in the first nine months of 2017 rose by 29 percent YOY. Every quarter since the end of Q3 2016 has seen NA announced deal count grow more than 20 percent YOY.
Worldwide M&A activity also looks set for a positive start in 2018, with our own Intralinks Deal Flow Predictor forecasting up to 6 percent YOY growth in the number of announced deals in Q1 2018. The dealmaking environment continues to be 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.
So, following another year of solid growth in 2017, dealmaking activity should remain buoyant going into the first quarter of 2018, at least based on Intralinks DFP. Given the historical accuracy of this data, it is reasonable to assume that the current seller’s market will continue into next year. And now, given the fact that tax reform legislation was passed, and we have clarity on a number of M&A related tax issues, any deals delayed in 4th quarter of 2017 will most likely be aggressively closed.
Your Interaction With This Data
However, this data means little to business owners who have no exit strategy in place. The only way to take advantage of this current environment is to explore your exit options NOW. Keep in mind that unless you want to conduct a fire sale and sell to the first (and only) buyer that approaches you, closing a transaction with an “optimal buyer” takes 9-14 months from when you start the process. Realistically, that places you towards the end of 2018 before your deal will be concluded.
Why do we emphasize the concept of an optimal buyer? Because an optimal business buyer is one that is worth the time it takes for you to find and negotiate with. This type of buyer will not only pay a premium for your company, but will also structure a deal that protects your interests and the legacy you have built in the business.
Generational Equity and its dealmakers have access to more than 34,000 buyers in its database, and thousands more via industry research databases. This allows us to not only know who is acquiring, but we also can answer the question of “why” they are acquiring. And the why is really the most important part of the equation. If a buyer is setting up a platform company and “adding on” to it via synergistic acquisitions, vertical and/or horizontal integration, or complimentary mergers, our dealmakers will most likely be aware of it as they create buyer lists for your company.
This is one of the reasons we are consistently one of the top ranked M&A advisory firms in North America year in, year out. Our ability to help our clients through a liquidity event is unparalleled.
And we are anticipating that 2018 will be another prime year for sellers to obtain top dollar for their firms.
If you are interested in learning how Generational Equity can help you realize your exit dreams, please contact us at 972-232-1121 or visit our website and provide us with your contact info and we will be in touch. The first step in our process is to have you attend one of our complimentary, highly educational, no-obligation exit planning conferences that we hold around the US and Canada on a regular basis. Even if you don’t end up using our services, attending one will give you an abundance of information you can use to start your exit planning process. You can research a location near you and see our typical agenda here.
Special thanks to Intralinks for providing such accurate and timely forecasts every quarter of pending M&A activity. But this information is only helpful to you if you act now and get your process started. Remember this: Exiting a company in an optimal fashion is a PROCESS, not an EVENT!
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2018 Generational Equity, LLC. All Rights Reserved.