Why will 2017 be a good year for M&A?
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According to the latest edition of the Intralinks Deal Flow Predictor report, 2017 is set to be an exciting year within the M&A industry. The report describes an optimistic forecast for the year ahead, and explains the reasons behind the optimism.
The predictive model expects that M&A announcements during the first quarter of 2017 will be around 5% higher than those during the same period of 2016, based on the data found in the Intralinks Deal Flow Predictor. Similarly, 75% of executives said that they are planning an M&A transaction during 2017, according to a survey conducted by Ernst & Young. According to EY, this is the highest response out of all 15 previous surveys.
Low inflation rates and slow global economic growth are expected to affect the abilities of corporates in growing their revenues and boosting their profits organically. As a result, throughout 2017, it is expected that companies will look to acquire smaller organisations as a means of organic growth. This will be especially evident when competitors are also engaging in M&A activity.
Intralinks also predict that the record-low interest rates seen at present, alongside readily available financing, will be strong motivators for corporates and financial sponsors to engage in M&A activity.
Interestingly, Intralinks also note that during the third quarter of 2016, financial sponsors made a significantly low amount of investments, and are now sitting on record amounts of uninvested money pledged by investors to private equity firms. Thus, there is now estimated to be around US$839 billion of capital available, which needs to be invested in acquisitions in order to generate returns for investors and fees for the financial sponsors.
The first month of 2017 has certainly lived up to expectations, with high volumes of completed UK deals witnessed during the month of January alone. Both UK and international buyers are maintaining a strong presence in the M&A marketplace at present, suggesting that the outlook for the next eleven months is as positive as ever.