For a number of years now SS&C Intralinks, a leading provider of secure data rooms for investment banks, has created a research tool updated quarterly called the Intralinks Deal Flow Predictor (DFP).
The information they track is based on what they are seeing in terms of data rooms being opened by M&A advisors, both on their site and other data room providers sites (see note below for details). Data rooms are a leading indicator of M&A activity out 3-6 months since M&A advisors use these rooms to store confidential information for buyers to review on their clients.
You may be surprised to learn that Intralinks is actually predicting an increase in transactions in North America through the end of the fourth quarter:
In North America we forecast the number of announced M&A deals to increase by around +6 percent YOY in Q4 2020, within a range of +16 percent to -4 percent. The U.S. recovery arch for the tail end of Q2 and early Q3 is promising in our view.
We concur with this assessment based on the record summer we had in terms of deals closed (in August we closed more deals than any month in the history of our company) and the fact that our NDA requests are up dramatically in 2020 over 2019. An NDA (non-disclosure agreement) is what we require potential buyers to sign prior to us sending any confidential information. It is an additional leading indicator of potential M&A activity.
Another piece of data that I found amazing in the Intralinks analysis was that, despite our economic challenges, deal valuation metrics have stayed stable (or in some cases actually increased in 2020):
(Source: SS&C Intralinks)
As you can see, through the first six months of this year, two key measures of deal valuation (Equity/EBITDA and Enterprise Value/EBITDA) have actually improved this year.
Again, this news may surprise you. But it does not surprise us. We have decades and decades of collective experience working for our clients to get them optimal deals no matter what economic cycle we may be in. The same is true right now.
Our track record speaks for itself and we are confident that the M&A resurgence we are seeing will continue for quite some time. No other M&A advisory firm that we are aware of has closed as many transactions as Generational over the past decade. In fact, in April of this year, we reached a major milestone with 900 closed transactions.
So, if you have put your exit plans on hold because of the assumption that this pandemic is causing buyers to retreat, you need to get your plans out and update them! Now is a great time to be in the market meeting with qualified professional buyers.
Our services are designed to help you do just that. To learn more about how we can help you, please call us at 972-232-1121 or visit our website, provide us with your contact information, and we will be in touch.
Intralinks DFP: The SS&C Intralinks Deal Flow Predictor provides Intralinks’ perspective on the level of early-stage M&A activity taking place worldwide during any given period. The statistics contained in this report reflect the volume of VDRs opened or proposed to be opened, through Intralinks and other providers for conducting due diligence on proposed transactions.
The prediction model has a very high level of statistical significance, with a more than 99.9 percent probability that the SS&C Intralinks Deal Flow Predictor is a statistically significant six-month predictive indicator of announced deal data, as subsequently reported by Refinitiv.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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