Over the years one of the most reliable predictors of M&A activity has been the Intralinks Deal Flow Predictor (DFP).
We have looked at the DFP from Intralinks many times over the years and have found it incredibly reliable and accurate in predicting future deal activity. The data they use is based on virtual deal room (VDR) activity that they see because they provide virtual deal rooms to M&A teams. So on a going-forward basis, the number of rooms they see created/opened and the volume of data being viewed gives them a very unique view of what will be happening six months and more down the road in the M&A arena.
This is how Intralinks describes their data and its basis for accuracy:
The 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, including asset sales, divestitures, equity private placements, financings, capital raises, joint ventures, alliances and partnerships.
To verify the predictive nature of the Intralinks Deal Flow Predictor, we compared the data underlying the Intralinks Deal Flow Predictor with subsequent announced deal volume data reported by Refinitiv to build an econometric model (using standard statistical techniques appropriate for estimating a linear regression model) to predict the future reported volume.
Having said all of that, the reality is that the Intralinks data has proven over and over to be extremely accurate in determining future M&A activity. And in their 3rd quarter update, this is what they say about North American activity:
North America is continuing to exceed the volume of deals and the ceiling for both volume and value keep shifting upward. Q1 2021 early-stage deal volume in the U.S. exceeded the same period last year by nearly 30 percent, as well as against Q4 2020. With mass vaccination rollouts and a steady pace of re-openings taking place in America, we anticipate further tailwinds to drive the remainder of 2021 into record territory.
OK so let that sink in a bit… a 30% increase in deal activity is significant and meaningful and indicative of a substantial record year. Generational data concurs with this info from Intralinks. Our deal closing rate is on a record pace over last year and last year was a record for us as well (actually our fourth record year in a row). Our most recent deal data reveals that our number of deal closings is up 39% over last year, a truly substantial amount which is great news to us and even better news to our clients!
What does all of this mean to owners of privately held companies?
Well, basically we are in the midst of a tremendous rebound from the impact of the pandemic on buyers. They are looking for good deals and are aggressively searching for them. If you are the owner of a privately held company today, you are quite possibly in the strongest seller’s market we have seen in decades.
So the question is what are you waiting for? Clouds on the horizon include an increase in interest rates, significant tax changes proposed by the Biden administration, and the unknowns of where we will be a year or two from now economically.
Your best course of action is to educate yourself on what is happening with M&A trends and decide how you want to proceed to protect and defend your net worth going forward. The best place to do that is at a Generational Growth and Exit Planning Conference. Even if you have gone to one before, attending an additional meeting will provide you with the latest data available on how you can prepare and take advantage of the current seller’s market.
To learn more, please use the following links:
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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