Global Deal Recovery to Continue in 2H24, Particularly in Americas – VDR Insight

By Rupert Cocke
Mergermarket

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Providers of virtual data rooms (VDRs), who have a unique perspective on upcoming dealflow, expect the ongoing recovery in M&A to continue in 2H24, particularly in the Americas.

The volume of pre-announced deal activity on SS&C Intralinks’ platforms has been particularly strong in the Americas, according to its Senior Vice President and Co-General Manager Bob Petrocchi.

The strong activity below the radar is a leading indicator that deal announcements should continue to grow, barring shocks in the Middle East or elsewhere.

Meanwhile, global sell-side kickoffs are up 23% on Datasite’s VDR platform in 1H24, according to the firm’s CEO and President Rusty Wiley. Meanwhile, asset purchases are even more active, with global kickoffs up 32%, he added.

In terms of deal announcements, global M&A was up 21% on the year in 1H24 on the same period last year, with aggregate volumes of USD 1.65trn spread over 17,919 deals, according to Mergermarket data. The aggregate volume was down 8.5% on 2H23.

Volumes in the Americas rose 34% on the year to USD 913bn (55% of the total); while volumes in Europe, the Middle East and Africa (EMEA) climbed 39% to USD 459bn (28% of the total); and volumes in the Asia-Pacific (APAC) region fell 23% to USD 276bn (17% of the total).

The largest deal of the year so far has been the USD 38bn spinoff of GE Vernova [NYSE:GEV] from General Electric [NYSE:GE] – a deal so large it was responsible for 4% of the deal volumes in the Americas in 1H24.

One major situation to watch in the months ahead is Calpine of Texas. The power company has a score of 59 out of 100, according to Mergermarket's Likely to Exit (LTE) predictive algorithm.*

Calpine’s score follows reports that Energy Capital, Access Industries and CPP Investments are exploring a sale or IPO of the business with a valuation of around USD 30bn, either by the end of this year or the beginning of 2025.

Hot areas of activity include industrials, particularly in the Americas and EMEA, Wiley said. Underlying trends include sustainability, innovation, defence and stimulus funding, he said.

Meanwhile, dealmakers in the Americas are particularly concerned with minerals/mining, real estate and tech, Petrocchi said, adding that tech, energy and retail are driving deals in EMEA. Energy is also a theme in APAC, alongside banking and manufacturing, he said.

One theme that emerged in the survey was longer due diligence times. The average due diligence period has extended from 124 days a decade ago to 203 days today, SS&C Intralinks’ Petrocchi said. Deals are taking longer to close, agreed Jeroen Kruithof, CEO of EMEA-focused VDR provider Virtual Vaults.

However, in 1Q24 due diligence times actually decreased by ten days in the US, according to Datasite’s Wiley.

An increasing focus on environmental, social and governance (ESG) due diligence is a major theme in Europe, according to recent reports on Mergermarket. Key developments include the need to understand supply chains; and probe dynamics that cannot be captured by data. Understanding a changing regulatory landscape in Europe is particularly important for private equity firms due to their long investment horizons, as reported.

by Rupert Cocke with analytics by Santosh Shetty 

*Mergermarket's LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.

Datasite CEO and President Rusty Wiley (Global)

How has the volume of new VDRs on your platform progressed through the first half of 2024?

Despite high interest rates, there has been greater market stabilization in the first half of this year, which has led to an increase in M&A activity. Globally, sell-side deal kickoffs are up 23% on Datasite’s platform between December 2023 and May 2024, compared to the same time a year ago. Regionally, sell-side deals have also increased: 17% in the Americas, 20% in EMEA, and a whopping 85% in APAC, over the same period.

Asset purchases or buy-side deals are even more active, with global kickoffs up 32% over the last six months, compared to the same time last year. Regionally, this spike is most apparent in the Americas, where buy-side deal kickoffs rose 42%, ahead of the 21% uptick in EMEA, and the 13% rise in APAC.

Given that it takes an average of six months to close a deal from opening a VDR, what do you think deal volumes will be like in the second half of 2024?

Since the last six months of M&A activity on Datasite, which facilitates about 14,000 new deals annually, provides a good indication of anticipated deal flow over the next nine months, 2024 is shaping up to be a good year for global M&A. In spite of high interest rates and persistent economic and geopolitical uncertainties, corporate finance activity is returning, which is, in turn, helping dealmakers act with more certainty, and plan more effectively.

This is evident when looking at the time dealmakers are spending preparing deals rather than executing them, and in the amount of content being added to data rooms on Datasite’s platform. 1Q24 year-over-year (YoY) due diligence times on Datasite have decreased by an average of 10 days in the US. For the six months between December 2023 to May 2024, content in Datasite data rooms is up by 32% on average, per deal.

Still, M&A may cool off as voters head to the polls in Europe and the US, and general uncertainty becomes stronger. Rather than risk initiating a new deal, which will immediately become exposed to the financial and market conditions brought about by campaigning and policies, dealmakers may adopt a ‘wait and see’ approach.

Which sectors are the most active?

A variety of factors is driving sector activity across all regions. Demand for sustainability, innovation, and wartime defense, combined with stimulus funding focused on infrastructure and manufacturing have powered investment in industrials, which has seen a 23% increase in global sell-side industrial deal kickoffs between December 2023 and May 2024, compared to the same time a year ago. This activity is being led by the Americas, followed by EMEA.

At the same time, repressed demand and greater consumer confidence are driving interest in consumer M&A. Global sell-side consumer kickoffs rose 28% in the last six months, compared to a year ago. EMEA deals are leading the charge, up 30% YoY, while deal success rates in the region also rose by 3%. In the Americas, mid-market consumer deals are experiencing a moment, with deal close rates increasing 4% from the same period last year. With spikes in January and April, consumer deal kickoffs have been roller-coasting throughout the last six months. This should result in waves of deal announcements beginning in September.

Datasite Forecaster: Spotlight on Consumer M&A