Asset valuation has been one of the biggest hurdles the merger and acquisition market has had to work through when trying to close a deal over the past 12 months, Intralinks says.
The M&A monitoring company has released its latest sentiment survey which polled over 1000 dealmakers globally to understand the state of the market.
Respondents said they felt deal valuation is a bigger challenge than shareholder activism or underperforming companies.
Global vice president of product marketing Matt Porzio said in Australia the pain point was emphasised in South Africa’s Woolworths’ recent takeover bid of retailer David Jones.
Porzio added generally in the initial marketing phase of a deal there’s a lot of interest.
“Buyers are chasing yield they’re trying to buy inorganic growth because they have huge earnings expectations and so they’re willing to put the letter of intent out there but as they get into diligence they start to dig into the market and also that specific asset or the company for sale and they’re making very logical arguments to sellers,” he said.
But it’s not at the point where the gap is so “severe” that deals aren’t moving forward, Porzio said.
The survey also revealed 65 per cent of APAC dealmakers surveyed thought the current M&A environment has improved compared to six months ago, but 80 per cent of the professionals said they expected deal volumes to increase of the next six months.
It’s interesting because there are two schools of thought here – those who think M&A activity levels drive economic growth or decline, and those who think it is the reverse.
“M&A activity begets more M&A activity,” Porzio said.
“Typically when a cycle starts it’s because there’s a view that economic growth will happen. You’re not going to be in a stagnant period or a recession.”