Global merger and acquisition activity is surging, with the latest Intralinks data predicting strong deal numbers over the next six months.
Providing an insight into the health of the global M&A market, the Intralinks Deal Flow Indicator (DFI) tracks global M&A deals reaching the due diligence phase before public announcement.
The latest June quarter data shows global M&A activity has increased with 16% quarter-on-quarter growth and 12% year-on-year.
Intralinks vice president of product marketing, Matt Porzio, told Business Insider with such strong results it is expecting M&A activity to continue to build momentum over the next two quarters.
Porzio said Intralinks is predicting global announced M&A volumes over 2014 will, for the first time since 2010, increase between six and 10 per cent year-on-year.
But the APAC region, he said, is showing signs of volatility, down 15% both year-on-year and quarter-on-quarter. The drop is largely the result of China’s economic realignment which Porzio said has seen investors touch the brakes on overseas acquisitions.
However, Australia’s M&A market doesn’t fit well into its geographical region, Porzio said, adding it correlates closer with North America. The June quarter data places Australia’s M&A activity up 4% quarter-on-quarter, largely driven by mid-market deals between around $10 million and $500 million.
“Over the last four or five quarters Australia has been more tied to the sentiment and deal increases in North America and Europe, rather than the rest of Asia,” he said.
“The global deal economy, so much is intertwined with North America, but also for overall APAC with quarter-to-quarter growth being down isn’t a huge surprise because last quarter it was up pretty significantly at 20%.
“Australia seems to be a little more steady both on its growth and decline. The rest of Asia tends to ebb and flow very rapidly.”
The idea that Australia’s M&A market is more closely tied to the US is interesting considering the reliance Australia has on countries like China and Japan for investment, particularly in property and the mining sector.
With Australia’s advanced economy, Porzio said: “From a deal maker mentality and a maturity level we tend to see Australia act and even react more like North America and Europe,” compared to some of the more developing markets in the APAC region.
Mining companies over the past two years have been attempting to rein in costs and clean up their balance sheets, shedding assets and projects which don’t align with their new business focus or aren’t economically viable.
This is filtering through to the types of deals which are being closed in the mining sector, Porzio said.
“There are some more selective asset sales, more piecemeal then the major deals,” he said. “There’s a pretty consistent, and it is down slightly, flow of individual mining asset deals, not the whole company.”
Economists have been stressing the need for Australia’s non-mining sectors, including retail and property, to grow, filling the gap of a drop off in resources investment over the past two years.
When it comes to M&A activity, the major deals have in the past been in the resources and mining sector.
But the latest Intralinks data shows a rise of M&A activity in the consumer sector, including retail and agribusiness.
Porzio said the consumer market has been gaining momentum in terms of “quarter-to-quarter deal cap”.
“They’re not nearly as high value or creating as much value as a multi-billion dollar mining deal but in terms of the mid market driving a lot of activity and keeping bankers and lawyers busy, not everyone’s working on the multi-million mining deals. The consumer market has been increasing.”
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