Recently Intralinks, a leading global technology provider of secure enterprise content collaboration solutions, released its 2nd Quarter 2016 Deal Flow Predictor (DFP). Intralinks has been releasing this information on a quarterly basis for several years now, and its statistics have proven to be a reliable indicator of future deal making activity.
“The DFP provides Intralinks’ perspective on the level of early-stage M&A activity taking place during any given period of time,” according to Intralinks. “The statistics contained in the report reflect the volume of Virtual Data Rooms (VDRs) opened, or proposed to be opened, through Intralinks or other providers for the purpose of conducting due diligence on proposed transactions.”
In laymen’s terms, their DFP is a leading indicator of future M&A transactional activity. And it has proven to be an accurate predictor of future trends. Again, according to Intralinks:
“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 DFP is a statistically significant six-month predictive indicator of announced deal data, as subsequently reported by Thomson Reuters.”
Note: Thomson Reuters is the standard bearer of M&A research.
How many sources of data can predict future levels of activity at a 99.9% rate? Few indeed, but Intralinks’ use of VDR data is compelling because of the fact that a VDR is usually only opened when a source believes that a transaction will occur. And, in fact, 2015 proved that their data was once again very accurate:
"In 2015, the total value of announced M&A deals reached a new all-time high: according to Thomson Reuters, the value of announced M&A deals was $4.8 trillion, a 43 percent increase compared to 2014, surpassing for the first time the previous all-time high of US$4.1 trillion in 2007, just ahead of the global financial crisis. The number of announced M&A deals in 2015 increased by just under 8 percent compared to 2014, rising to a total of just over 45,500 deals, which is within the range we predicted six months ago of a 6 to 9 percent increase."
Two key points can be gleaned by this information: 2015 was a RECORD year for deal closings AND the Intralinks DFP proved again to be reliable.
The question that naturally arises now is what do the folks with Interlinks believe is going to happen in 2016? What impact has fears over economic slowing worldwide and stock market fluctuations had thus far on VDR creation? It appears that deal making is still heading for a continuation of its record year going into 2016, based on Intralinks’ interpretation of their data:
"The number of global announced M&A deals in the first half of 2016 will be modestly higher than the first half of 2015. The mid-point of our forecast is for 3.5 percent growth, with a range between 1.5 and 6 percent. In North America, we expect a modest increase in M&A activity as a result of the Fed taking a cautious approach to further interest rate rises in 2016, continued steady US economic growth, lower raw material and energy costs due to low oil prices and a stronger dollar."
Although M&A activity may be slowing from 2015’s frenetic pace, 2016 will still witness an increase both globally and in North America, based on the Intralinks data. This is vital if you are the owner of a privately held company today. You still have a window of opportunity to find an optimal buyer, because, as the folks with Interlink so clearly point out, the factors causing demand to remain strong are not changing:
"The reasons for this flurry of deal activity – be it at the top or bottom end of the market – appear to remain the same: corporates are finding it difficult to generate sufficient organic revenue and profit growth to satisfy their shareholders and are therefore looking towards acquisitions to deliver growth, while at the same time they are making use of historically low interest rates and ready availability of debt financing to fund deals."
Far too often folks in the U.S. forget we still have the most stable, established, and reliable economy in the world despite our concerns about our economy’s future. How many countries in Europe are envious of our predicted 2%-2.5% projected economic growth this year? Most, I would venture to guess! And on top of that, business leaders know that it is far more efficient to buy an existing business than to enter new markets and regions from scratch.
Despite the Fed’s actions in December to raise rates, interest rates in the U.S. are still far below historical norms, making deal financing plausible. Based on buyer interest we are seeing thus far in 2016, we are in agreement with Intralinks and believe that 2016 will provide our clients that are in market with ample opportunities to find buyers.
FYI, you can download a copy of the Intralinks DFP for this quarter.
The key takeaway for you, assuming you own a business, is this: Given the highly accurate nature of the Intralinks data, the longer you wait to act on your exit plan, the less likely you will be in the current seller’s market that we find ourselves in.
Certainly businesses are sold every year in spite of (or despite) M&A trends. If you own a well run, profitable, growing business, odds are good you will be able to find buyers no matter what cycle we are in. However, in buyer’s markets valuations tend to be lower and deals take considerably longer to close. Acting in the midst of a seller’s market simply makes good sense.
Special thanks once again to Intralinks for tracking VDR activity so closely and determining where we could be heading in the ensuing months.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2016 Generational Equity, LLC. All Rights Reserved.
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
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
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
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 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
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.
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
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
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
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
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
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 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
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
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 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.
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
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
By submitting my name electronically and clicking the “submit” button, I understand that I am providing Generational Group, Inc., Generational Equity, LLC, Generational Capital Markets, LLC, DealForce LLC, their affiliates, representatives, contractors, etc. (“Generational Group”) my telephone number, which may include a number that is wireless and/or a number that is on a national, state, or other Do Not Call registry or list. I hereby consent and agree to receive telephone calls including any autodialed and/or pre-recorded telemarketing calls and/or text messages (telemarketing) from or on behalf of Generational Group at the telephone number provided. I further consent and agree that telephone calls may be made using automated technology such as an automatic telephone dialing system, artificial or prerecorded voice, or SMS text messaging. Consent is not a condition of purchase. I further warrant and represent that any telephone number provided is not on any state or national Do Not Call Registry and that by agreeing to these terms and conditions that if any number provided is on any such registry, I hereby consent and agree to receive telemarking calls and/or communications including any phone calls, text messages, URLs, links, emails, etc. to the telephone number(s) and/or any e-mail addresses provided. I understand that by entering my name in the electronic form provided, that I am signing my name as equally as if it was my handwritten signature and that it is my intent to provide an “electronic signature” as that term is defined in state and federal law, as well as industry practices for e-commerce.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.
Honored to win Investment Banking Firm of the Year 3 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.