2016 was quite a year: upset in the markets, political upheaval and a global economic slowdown…..
But what do all of these things have in common?
None (really) impacted global M&A activity, in the grand scheme of things. A welcome victory for the M&A community.
Now that we are in 2017, Intralinks has surveyed 440 global dealmakers to determine overall sentiment and outlook for the coming months. Has anything actually changed or is M&A activity set to remain as buoyant as ever?
The influence of politics: overrated?
Unsurprisingly, President Trump and his new US administration will cause the most impact to global M&A deals over the next twelve months, according to 45 percent of respondents. But the survey also declares that Britain’s decision to leave the single market and head for a ‘Hard Brexit’ will not impact cross-border M&A activity with UK targets. This is a welcome result for the City of London which is currently under fire, with big banks announcing the movement of staff to mainland Europe as a result of Brexit.
Only time will tell if President Trump and the new US administration or the Brexit negotiations will have a detrimental impact on global M&A deals. At Intralinks, we’ve certainly seen M&A activity remain resilient to political volatility over the last year or so, as buyers review new opportunities in light of new macroeconomic conditions and cause growth in M&A deal volumes. Sure, there may be regional differences and deal anomalies; but globally, things tend to even out and stay on track despite political changes.
Data breaches and deals: signal or noise?
Given recent headlines surrounding data breaches, impacting valuations and time-to-deal completion, just how big is the problem? Our survey concludes 50 percent of dealmakers believe data breaches at M&A target companies could reduce bidder valuations between five and 20 percent.
Putting these percentages into the context of the bigger deals, the average mega deal was valued at 14.6bn in 2016, according to Thomson Reuters.[i] If we apply these percentages, it means data breaches could reduce deal values by up to $3bn. That’s a lot of cash.
Furthermore, 24 percent of dealmakers expect more deals to fail to complete as a result of data breaches or cyber security issues over the next six months, compared to the previous six months, with only nine percent believing less will fail.
It seems 2016 fired the starting pistol on more high-profile data breaches impacting M&A deals. Dealmakers don’t expect these types of breaches to decrease; the question is just how many more breaches will there be. We expect more attention being paid to M&A cybersecurity issues in 2017.
Bigger deals on their way
Our survey also uncovered positive sentiment with regards to deal value, as well as deal volume. Forty-five percent of dealmakers expect the total value of announced deals in their region to be higher over the next six months compared to the previous six months. Fifty-three percent of global dealmakers also expect to participate in more deals over the next six months. Considering the volatile political and economic backdrop, dealmakers are still optimistic. Again: this points to the resilience of the M&A market, which should continue into the next six months.
The latest Intralinks Deal Flow Predictor, which accurately predicts the volume of M&A announcements six months into the future, will be released on February 16, 2017. For more predictions about M&A in 2017, click here.
[i] In this case, mega deals are valued at $5bn+