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Rising Rate Environment Will Dampen Dealmaking in North America, Forecast

August 21, 2017, 08:00 AM
Filed Under: Mergers & Acquisitions

The total number of worldwide M&A deals is expected to exceed 50,000 in 2017, an increase of up to 8% over fiscal 2016, setting a record for worldwide annual announced deal count, according to a predictive analysis released by Intralinks, Inc., a subsidiary of Synchronoss Technologies, Inc.

Worldwide, over the next six months, the strongest growth in deal announcements is expected to come from the Healthcare, Real Estate and Consumer & Retail sectors. According to Intralinks analysts, the dealmaking environment continues to be supported by a combination of a gradual pickup in global economic growth, subdued inflation in advanced and emerging economies, and historically low interest rates.

North America has seen especially strong activity.

"Ten years after the start of the global financial crisis, worldwide M&A activity continues to set new highs, driven by an extraordinary surge in dealmaking in North America,” the report says. “According to Thomson Reuters, the number of announced deals in North American in the first half of 2017 increased by an astonishing 28% year over year, far outstripping deal count growth in the rest of the world.”

However, analysts forecast that the number of announced M&A deals in North America will close out the year with an increase of around 10%, amid concerns by dealmakers over the tightening U.S. interest rate cycle.

“The U.S. is unique among the major advanced economies in having embarked on an interest rate tightening cycle in December 2015, with four interest rate rises in the past 18 months, despite limited evidence of inflationary pressures in the U.S. economy,” the report notes. “The euphoric increase in U.S. M&A announcements since the election of President Donald Trump, predicated on the assumption of a fiscal stimulus boost to the U.S. economy and massive infrastructure investments promised by President Trump during his election campaign, may prove short-lived. 

Among the other challenges expected to disrupt global dealmaking activity are concerns over cybersecurity. Worldwide, 24% of dealmakers who responded to the Intralinks survey expected more deals to fail because of data breaches or cybersecurity issues over the next six months.

Meanwhile, more traditional leaks may be good for business, a seperate Intralinksreport finds.

Leaking information on mergers and acquisitions (M&A) deals before any public announcement of the transaction added an extra $21 million to the average value of deals announced in 2016 that leaked, according to new research from Intralinks and Cass Business School, City, University of London.

In addition to evidence of higher valuations for M&A deals that leak, the recently released 2017 Intralinks Annual M&A Leaks Report found that 8.6% of worldwide M&A deals were leaked in 2016. This figure is unchanged from the previous year (2015) and above a six-year low of 6% in 2014. In 2014, worldwide deal leaks had been on a declining trend for the previous six years, but this trend reversed in 2015 and 2016 – despite the efforts of financial regulators globally in recent years to bring in new regulations to curb deal leaks, and increase enforcement actions and fines for market abuse and insider trading.

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