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.
© 2021 Generational Equity, LLC. All Rights Reserved.
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.Caroline Connelly, CEO, OptoTest
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.Rick Greene of Dobbs Equity Partners LLC
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
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.
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
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.Shane and Johanna Kline, Owners of Vision Upfitters
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
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.Salvo Stoch, Founder and CEO of Sleeping Partners
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
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Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!JoAnn Ellis, Owner of Fondren 5 Star Kennels
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
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.Betty L. Brennan, President, Taylor Studios
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
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.
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
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
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.JoAnn Ellis, Owner of Fondren 5 Star Kennels
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
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.
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
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!Tom Currier, Former President & CEO, Rackmount Solutions
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
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.
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