Intralinks' Deal Flow Predictor: forecasting M&A from the due diligence pipeline

• The Deal Flow Predictor forecasts M&A six months out using Intralinks' own due diligence data.
• Over 20,000 pre-announced deals flow through the platform annually, creating a visible backlog.
• Q3 2022 forecast was roughly -5% to +5% globally, yet still about 20% above 2019 and 2020 levels.
• A large pre-deal preparation backlog signalled activity still to launch.
• Regional reads: Italy a bright spot in EMEA, strong pre-deal activity in North America.

Most vendors talk about the M&A market in generalities. Intralinks can talk about it from the inside, because a large share of the world's deals are prepared on its platform. On DealCast, the M&A podcast it co-produces with Mergermarket, SS&C Intralinks co-head Bob Petrocchi walked through the company's signature output: the Deal Flow Predictor.

“We are seeing over 20,000 pre-announced deals flow through our desk annually.”

Bob Petrocchi, Co-head, SS&C Intralinks

The Predictor is a six-month forward view of global and regional M&A, and crucially it is built from Intralinks' own due diligence data rather than announced-deal headlines. Petrocchi notes that more than 20,000 pre-announced deals pass across the company's desk every year, deals being readied in data rooms long before they become public.

“We're forecasting Q3 2022 volumes to be higher than Q3 2020 and Q3 2019 by over 20%. So there's a lot of activity in the markets.”

Bob Petrocchi

That early vantage point is the whole point. For Q3 2022 the headline forecast was modest, somewhere between minus five and plus five percent globally amid the geopolitical backdrop, but Petrocchi reframed it: volumes were still running roughly 20% above the same quarter in 2019 and 2020. A heavy backlog of deals in preparation suggested activity waiting to launch.

“That pre-deal preparation phase, the 20,000 pre-announced deals, is creating a very significant backlog that will materialize as new deal activity.”

Bob Petrocchi

The regional detail is where the platform's reach shows. He flags Italy as a double-digit bright spot in an otherwise choppy EMEA, sees APAC clustered around the same flat range despite China's production-hub pressures, and reads North America as cooling from a heated Q1 but still carrying a deep pipeline of pre-deal preparation.

For a buyer evaluating Intralinks, the value of the episode is the proof behind it. A data room that can forecast the market from its own pipeline is demonstrating exactly the scale and centrality a serious dealmaker wants underneath their most sensitive transactions.

Shows the market intelligence Intralinks derives from sitting at the centre of global deal preparation, a credibility signal for buyers rather than a feature claim.

Welcome to DealCast, the weekly M&A podcast presented to you by MergerMarket and SS&C Intralinks.

I'm Julianna Needham, a business journalist who's been covering M&A for a decade.

In this week's special episode, I'm joined by the co-head of SS&C Intralinks, Bob Petrocki, to discuss the latest findings from the third quarter edition of SS&C Intralinks DealFlow Predictor.

The deal flow predictor is based on data from the company's due diligence platform and has highlighted a number of trends in M&A.

Hi Bob, thanks for joining me today and good to have you back.

Hi Juliana, it's great to be back.

So Bob, let's start by looking at an overview of M&A activity globally.

What have you seen in the first half of 2022 and what are you expecting to see in the latter part of this year?

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I mean, relatively speaking, we've seen less volatility in the M&A markets globally than we've seen in other corners of the markets, like equities, as an example.

That said, we are seeing over 20,000 pre-announced deals flow through our desk annually.

And as anticipated, M&A volume is trending downward.

In Q3, we anticipate a range of between negative 5% to positive 5% movement over quarter yearly.

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And, you know, more than a negative 5% movement, quarter over quarter, Q1 to Q2, Q2 to Q3.

So we shouldn't be surprised at neutral to negative outlooks, you know, based on all the geopolitical activity and events.

But if we look at the bigger picture and keep that in mind, we're forecasting Q3 22 volumes to be higher than Q3 20 and Q3 2019 by over 20%.

So there's a lot of activity.

in the markets, I think that that pre-deal preparation phase that we are noticing, the 20,000 pre-announced deals, are creating a very significant backlog that are going to materialize as new deal activity in Q3.

Great, thank you.

And looking at the different regions, can you talk us through what's been happening in the Asia-Pacific region to start with, and which sectors saw the most activity there?

So on the surface, we're expecting larger negative trends toward pull-down regional activity, but we're pretty surprised at how the major markets performed.

China obviously has an outsized impact from a macroeconomic perspective, and their production hubs continue to be a challenge.

But, you know, we can't really make predictions for individual countries as well as we do for entire regions.

It's difficult to pinpoint in that way, but we have seen growth quarter over quarter and quarter over quarter year to date for mainly in China, Hong Kong, and even South .

So it's interesting.

Other major markets like Australia, India, Japan, and Singapore have experienced more volatility, which brings our Q3 announced forecast for APAC to probably that same range of negative 5% to positive 5% year over year and quarter over quarter.

But again, we have seen a lot of activity in manufacturing, biotech, and retail.

So it'll be interesting to see how it all plays out.

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And can you explain how this differs to the EMEA region and what activity and trends you're seeing there, please?

Like AIPAC, we've anticipated a little bit of an impairment to the EMEA market based on, you know, what's happened with the Russian invasion of Ukraine.

Although the region's probably a little stronger than the others with a little bit more of a flat to positive outlook, where, you know, we're anticipating the lower end of the range on a quarter to quarter over quarter .

So that's what we're seeing there.

Italy stood out as a real bright spot with double-digit growth quarter over quarter and quarter over quarter year to date.

But we've seen some choppiness in other areas like France and Germany and the UK.

So generally, we're seeing an uplift in early-stage deals and early-stage deals that haven't launched yet.

Thanks, Robert.

And looking to the West now, starting with North America, .

We saw a lot of early stage deal activity there.

Can you talk us through the big trends that you've seen in the North American region, please?

Absolutely.

So North America definitely relieved some of the pressure on a really heated market in Q1.

And we're forecasting in that territory that it may underperform less than the negative 5%.

The interesting thing we're seeing there, again, is a lot of activity in our deal prep stage.

So we're getting a lot of deals.

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There's some, you know, pre-transaction diligence.

So a lot of activity in our prep stage.

And we think, you know, at some point, those will all launch and have a positive impact on the market.

But North America's performance overall through 21 was, you know, obviously extremely strong.

And that carried the global performance.

So we saw some moderation as anticipated with inflation and, you know, the interest rate movement, which we think has already been priced into assets above normal ranges.

That aside, compared to 2020 and 2020 Q1 early stage performance, it's still strong.

So when you zoom out, North America is still showing very strong activity.

As I said, a lot of pre-deal activity seems to be the flavor and we've seen that continue through Q2.

So that may be forecasting as stronger than expected H2.

And you mentioned about the preparation, the pre-deal prep that's going on.

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What's prompting that?

And is that more than you've seen in previous years?

It absolutely is.

I mean, my interpretation of it and what we've seen as far as, you know, we don't, we can't see specific information in the deal room, but we can see trend line analysis.

So more time in the early diligence phase, it could be around, you know, regulatory concerns.

It could be around price pressure.

It could be around valuation issues.

So there's just been more activity there before the deals are launching.

But it's, .

You know, clearly, the deal prep phase has been longer than we've seen throughout 21, which, as we all know, is a really, really active market.

And turning now to Latin America, can you tell us more about the trends that we're seeing in the early stage volume and also other trends in the region there?

So not very different from what we just discussed in North America.

There has been more early stage activity in LATAM.

Now, look, volatility in LATAM is not necessarily is something new.

We always see that year over year.

But the volatility for 2022 is definitely a return.

So we've seen strong numbers through 21.

We're forecasting probably under performance quarter over quarter in the double digit range.

But the drop is less severe.

I mean, look, everywhere compared to 21, which was, you know, record highs in basically every segment is slowing down a little.

But but the volatility in the Latin markets are certainly .

So, you know, obviously, regional volume in LATAM is carried by the largest economy, which is Brazil.

And from our vantage point, the deals fell back a little short compared to Q1.

But we're actually seeing an uptick compared to Q4 and 21.

So that's really positive.

And, you know, when we talk to the sales teams on the ground, it seems like there's definitely restructure, mergers, and some consolidation in some of the markets.

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One quarter doesn't make a trend.

Brazil, Colombia, Mexico sore growth in Q1 compared to Q4.

So hopefully that's an indication that we'll see some stability in the second half.

And what about the sectors within the Latin American region?

So from a sector perspective, the ones that are typically the most active for us are energy, oil and gas, and restructuring are always where we see strength in that segment.

And we're continuing to see that.

More consolidation.

in the energy field, which, again, has been driving some of the Q, the first half activity.

And we'll expect to see that a little bit more in the second half.

When we talk about the pre-deal stage that we're seeing, there has been heavy activity in the prep stage in both of those sectors.

Thank you.

And you've touched on some of it already in some of your answers.

But what are some of the possible challenges you're seeing through the remainder of this year?

There are obviously a lot of geopolitical, and macroeconomic factors at play at the moment.

Look, uncertainty in the market always causes challenges.

And, you know, sometimes that's an opportunity, depending if you're a buyer or a seller.

But, you know, Russia's invasion of Ukraine is causing a lot of logistical, you know, dislocation of food, energy supply, you know, and uncertainty in the market.

So that, you know, that absolutely is going to be a challenge.

China's zero COVID-19 policy has got, , which is a huge impact on the supply chain, which is slowing everything down, energy prices, interest rates, the equity market, that seems like it's a different bag of tricks every day.

So I think overall instability in all these different areas are a challenge in the markets.

I think uncertainty creates that instability and that will slow down deal activity.

I think there's also more diligence and more uncertainty in how to price some of these assets.

, which is causing a slowdown in deal launch, right?

We talked about a little bit more, more diligence, more of a request for understanding around, you know, how to properly price these assets.

And, you know, as always, the sellers are going to be more aggressive and the buyers are going to say, hey, let me wait and see what, you know, what this market's going to hold.

So I think all those create a challenging environment moving forward.

But with that said, I've been, you know, very surprised with how well the markets are responding.

We're talking about this range between negative 5% and 5%, but it's against a historic year in M&A.

So I think overall, there's a positive outlook.

Maybe I'm just an optimist, but I see a lot of positives in what we're seeing from a trendline perspective.

Bob, thanks very much.

My pleasure.

Thank you for having me.

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