Expect more deal activity on the mergers and acquisitions front, according to projections from Intralinks Holdings Inc.
The Intralinks Deal Flow Predictor is projecting that the global volume of M&A deals in the first nine months of the year will likely be above that for the same period in 2014, in the range of minus-1 percent to plus-3 percent. The latest DFP noted moderation of growth in global early-stage M&A activity, and is now expecting a midpoint of 6 percent growth for the first half of 2015. The range for the period is between 4 and 8 percent. The U.S. and the Europe, Middle East and Africa regions are expected to be the main drivers of growth.
The volume and value of global announced M&A deals in the first quarter of 2015 rose by 14 percent and 25 percent year-over-year, respectively, making it the best start to the year for deal-making in the first quarter since 2007, according to the data. The data also is suggesting that the number of megadeals, those with a value of more than $5 billion, will likely continue during the year. Already there were 28 megadeals disclosed in the first quarter, compared with the 14 revealed in the comparable period in 2014.
Helping the U.S. M&A market are a favorable interest-rate environment, cash-rich buyers and a strong dollar. The study noted that while U.S. entities will continue to benefit from low financing costs, a “surging U.S. dollar may act as an economic drag everywhere else in the world.” It concluded that companies and governments that “once gorged on dollar-denominated debt will likely be hit by the rising costs of debt repayment in local currency terms.”
While growth across most of Europe is more sluggish than in the U.S., that doesn’t seem to be holding back M&A activity in the region, according to DFP data. Germany, France and Spain are showing strong levels of activity in early-stage M&A activity.
In the Asia-Pacific region, companies in China and Japan have been active outbound M&A acquirers, showing interest particularly in U.S. assets. However, they may shift their sights to other regions, such as targets in the euro zone, as deals in the U.S. become more expensive, the study concluded. Further, there’s been an uptick in M&A activity in the Indian subcontinent, mostly due to improved business sentiment following the election of Narendra Modi’s centrist government last year.
Over in Latin America, weak commodity prices, contracting demand and an appreciating U.S. dollar will continue to hurt and hamper M&A activity in the region.