From time to time, we like to take a look at various indices as predictors of pending M&A activity over the next year or more. One of the most reliable that we have used throughout the years is the Intralinks Deal Flow Predictor (DFP).
Intralinks is in a unique position to gauge future deal activity since they are a global technology provider of secure enterprise content collaboration solutions. One area of specialization that they provide is creating and managing virtual data rooms (VDRs) for M&A firms.
For several years, they have created the DFP based on what they are seeing on their network in terms of VDR activity. They keep the information regarding who is creating the VDR confidential, but they use the activity to predict future M&A trends. And their DFP has proven to be very accurate:
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.
A few months ago, we looked at their first quarter 2017 predictor where Intralinks stated, “Announced deals in Q1 2017 will be around 5 percent higher than in Q1 2016.” So it was with great anticipation that I reviewed their 2nd quarter DFP release that has continued to show predicted M&A growth for the next six months:
We are actually predicting an even larger increase in deal making activity in 2017 based on the buyer activity and interest we have seen so far this year. Discussions we have had during the first half of this year indicate that dealmakers are quite bullish on their plans for this year and beyond.
In fact, we are on pace to have another record year. Through the first few months of this year our deal closings are up 36% compared to 2016 and our dual signed LOIs (letters of intent) are likewise up over 10% when compared to the same timeframe last year.
Dual signed LOIs are a key indicator because they typically result in closed deals since both seller and buyer have “signed off” on the initial draft of the purchase agreement. With closed deals up significantly and pending transactions likewise showing improvement, it is safe to say that buyers have a growing interest in doing deals.
And, according to Intralinks, there are several compelling trends that are driving this demand for acquisitions:
We concur with Interlinks in this analysis. These factors, coupled with the significant cash on corporate balance sheets and capital in play with equity firms, are converging to make this an optimal seller’s market for those owners who are both personally and professionally prepared to exit, either partially or wholly, via an exit event.
But the reality is you don’t decide today to sell your company tomorrow. It is a process that begins with the formulation of the reality that eventually your legacy will need to be transferred to a new owner. Either to family members (not optimal in most cases), employees (often even less optimal) or to a third party. Under any of these scenarios, the most important concept is planning. Without planning and preparation, you may fall into the trap far too many business owners find themselves in: Making a transition when circumstances force you to, not when the market timing is optimal, as it is now.
A great way to start your planning is to attend a Generational Equity exit planning conference. These are no-obligation, complimentary and are led by seasoned M&A professionals, many of whom have exited their businesses and can tell you real world stories of how (and how not) to do it. To learn more, call me at 972-232-1125 or email me at firstname.lastname@example.org. Here are some links that you might find helpful as well:
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2017 Generational Equity, LLC. All Rights Reserved.
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
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