The number of deals being done is on the rise, Intralinks is forecasting.
Releasing its Q1 2015 Deal Flow Predictor (DFP) data today Intralinks expects the market will see a 5% quarter-on-quarter decrease but overall an 8% year-on-year increase in early-stage global M&A activity next year.
The DFP uses data on early-stage M&A deals to predict future activity in the next six months.
Leading the pack, Intralinks is forecasting deal volumes to be strongest in the North America and Asia Pacific regions.
Its quarterly DFP shows an 18% quarter-on-quarter increase in Asia Pacific deal activity.
This map shows the early state activity Intralinks is seeing across the world.
Early-stage M&A activity levels in the Asia Pacific region (including Australia) are up 7% year-on-year and 18% quarter-on-quarter.
The activity jump quarter-on-quarter was seen across almost the entire APAC region, Intralinks said, adding there was a solid pick-up in South Korea, Singapore, India and Japan.
“Deal volumes across Asia Pacific have been particularly impressive, with the largest increases in activity seen across the manufacturing/industrials, technology and consumer sectors,” Intralinks vice president of M&A strategy Matt Porzio said.
Porzio said the momentum of 2014 will carry through to 2015 driven by an expected rise of globally announced M&A volumes for the full year of 2014 of between seven and 11% compared to 2013 – a result which would be the first annual increase in the number of announced M&A deals since 2010.
“The combination of increasing competition among buyers along with corporates actively looking for new opportunities is driving increased activity,” Porzio said.
“Sellers are motivated and buyers having access to financing, enabling them to grow. Global deal volume continues to go up and we expect to see a good number of high profile deal announcements through early 2015.”
Speaking to Business Insider, Porzio said in Australia it looks like there’s a backlog in the middle market with deals.
“There’s a sense of cautious optimism,” he said, adding, “The market can shift pretty quickly.”
He explained while Intralinks is forecasting healthier deal levels into 2015 he warned APAC has always been a market which experiences a lot of “volatility”.
He said slower Chinese growth, the trend of capital leaving the Asian powerhouse and gaps in the Australian economy as it transitions away from the mining investment boom are all being used as negotiation tactics right now but he said dealmakers are mostly confident about the long term fundamentals.
“Knowing that mature economies can get through gaps like that gives us confidence in the long term,” he said.
“They’ll use something like that to negotiate, especially on the buyer’s side, to get a better deal.
“In the long-term it’s strategic to them to have a certain technology, to be in certain markets or expand in certain ways – to do the deal.”
He said while economic issues left unsorted can be a drag on the deal market, which is what happened when the GFC hit, they don’t “drive” the deal.
The number of deals flowing through due diligence is one side of the M&A market – the other way to determine future activity is by gauging dealmakers’ sentiment.
Intralinks surveyed 700 M&A professionals in September 2014 to get an understanding of what those on the ground think of the market.
“Australia is a very sentiment-led market,” Porzio said.
The results showed 60% of dealmakers are largely positive about the next six months but optimism has dropped 6% since last quarter. Part of that is 69% expect deal volumes to increase over the next six months, down from 77% last quarter.
Dealmakers are also expecting energy and power tech to be the two most active sectors over the next six months but 54% of respondents said recent tech deals and valuations are signs of a tech bubble.
The wheeler dealers also said valuation remains the trickiest part of a transaction.