Merger and acquisition (M&A) activity is on track to reach record levels this year after a first half dominated by mega deals, even as valuations reach new highs, according to two pieces of research from data company Intralinks and consultancy EY.
Global M&A volumes for this year will probably increase by about 11 percent from last year, according to Intralinks’s latest Deal Flow Predictor, as cheap financing and growth plans drive deals.
Last month was the highest on record for transaction values, according to a separate report from EY, setting the second half up to challenge 2007 as the best year on record for M&As.
Europe, the Middle East, Africa and the US will continue to drive a surge in deals for the rest of the year, the Intralinks report says. The Asia-Pacific region is set to benefit from foreign buyers looking for exposure to high growth in emerging markets.
The report predicts future M&A volumes by tracking deals that are in the early stages or have reached due diligence, and which are typically about six months away from being announced.
“Overall, confidence in the deal-making and investor community remains high, so expectations for a strong close to 2015 seem reasonable,” Intralinks vice president of strategy and product marketing Philip Whitchelo said.
Valuations are also forecast to rise to a new high after reaching an average of 16.5 times earnings before interest, tax, depreciation and amortization in the US during the first half, Intralinks said.
Companies are pursuing big deals. The 37 percent rise in M&A values in the six months through last month included 31 deals of more than US$10 billion, the most mega deals ever in a first half, EY said.
The second half of the year should continue to yield large transactions, with deal-making intentions among global executives at a five-year high. More than 50 percent of executives surveyed for EY’s Global Confidence Barometer are planning to pursue acquisitions in the next 12 months.
“M&A as a route to growth is firmly back on the boardroom agenda,” EY global vice chair of transaction advisory services Pip McCrostie said.
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