March 24, 2021

DealTech: M&A volumes surge as restructuring deals lag expectations – VDR Insight

By Rupert Cocke 

M&A deal volumes have continued to flourish in the first quarter of the year, setting up 2021 for healthy activity levels, particularly when a long-awaited wave of restructuring deals emerges, according to providers of virtual data rooms (VDRs). https://www.mergermarket.com/intelligence/view/intelcms-3drtww

Datasite has seen a significant increase in activity on its platform since the end of last year, CEO Rusty Wiley said. This is mostly driven by sellside mandates and merger activity, he said.

About 18% of the projects on Datasite are distressed, Wiley said, adding that he expects a large number of restructurings and bankruptcies to come as government intervention in the economy recedes as the year goes on.

Meanwhile, SS&C Intralinks has also seen growth, led by the US and APAC, Senior Vice President and Co-General Manager Bob Petrocchi said. Its projections suggest strong growth in 2Q21 as well, he added.

Bankruptcy and restructuring deals are already coming into the market in the US, where this activity is not as regulated as in other geographies, Petrocchi said.

EthosData’s CEO Francisco Lorca said that restructuring transactions are taking a surprising amount of time to emerge. There could be a wave when governments roll back subsidies to companies, he said.

IPOs involving special purpose acquisition companies (SPACs) have been major drivers of activity on the capital-markets side, Petrocchi and Lorca agreed. There has been a surge in usage in VDRs to prep IPOs, Admincontrol’s Head of Data Rooms Mari Nygård said.

 

Admincontrol’s Head of Data Rooms Mari Nygård

How have user volumes progressed over the first quarter across your platform?

We have seen high activity levels on our platform throughout 1Q21 and are experiencing an increase in user volumes and activated portals of more than 25% compared to the same period of last year.

Based on this information, can you make any projections for the second quarter?

We are seeing booming activity on a level that we have never experienced before. With the current momentum in the market, we do not expect this to drop soon, and expect to maintain high activity levels throughout 2Q21. This projection is underlined by the amount for portals on our platform in preparation mode. Almost half of the data rooms that we initiated in 2020 are now being prepared for due diligence, and we expect many of these to go live and invite counterparties in during the next months.

Have you spotted any interesting trends recently?

We continue to see a rapid digitalization of the due diligence process. An increasing number of data-room purchases go via our fully automated web shop, and our customers are embracing our new digital tools like automated folder structure and subscription management.

When it comes to the types of transactions, we see a surge of IPOs, with an increasing proportion of our portals being used for IPOs or preparing for IPOs. We also see a continuance of many of the trends that we already saw during 2H20, including high activity in the energy sector, life sciences, tech and home delivery services. 

Further research from Admincontrol

 

Datasite’s CEO Rusty Wiley

How have user volumes progressed over the first quarter across your platform? 

Since the start of the year, we have seen a significant increase in activity on our platform – beyond even what we saw in the second half of last year, where activity was north of 20% year-over-year. This year, new projects on our platform, which facilitates close to 10,000 deals a year, are up 32% through February, and we expect March to be even higher, as deals month-to-date are up by over 45%. Positive sellside or merger deals are driving most of this activity, though we are seeing some distressed projects – about 18% fall into this category – but not nearly the number of restructurings and bankruptcies that may come, once government intervention subsides.

Based on this information, can you make any projections for the second quarter? 

Continued favourable interest rates, access to capital and safe vaccines are combining to create improved investment conditions and we expect this to continue throughout this year. In fact, we expect one of the most robust years ever in terms of M&A volume. Additionally, since we expect to see a higher volume of deals this year, this may mean higher valuations and more competition for dealmakers, which have consequences for both the sell- and buy-side, including the need to use more digital tools and processes to compete and get deals done effectively and efficiently. Dealmakers certainly proved that deals can be done remotely and online last year and that trend is likely to continue this year.

Have you spotted any interesting trends recently? 

Last year proved just how crucial technology is, and will continue to be, in delivering services, engaging with customers, and providing business continuity. So, in terms of sectors, technology is still outperforming every other sector as more companies turn to M&A to strengthen their digital infrastructure and capabilities. Additionally, there is lots of activity in life sciences and healthcare. While we do expect to see recovery in other sectors, commercial real estate will look vastly different post-pandemic, and long tail bankruptcies are going to show up in areas like retail and will be of varying sizes.

Further research from Datasite 

 

EthosData’s executive team

How have user volumes progressed over the first quarter across your platform?

CTO David Diez said: We saw a leap in data room usage in 1Q21 with 50% more sessions than 1Q20. Overall, activity has increased continuously since 3Q20, showing resilience of the market and a sense of optimism for 2021.

Based on this information, can you make any projections for the second quarter?

Director Harsh Batra said: We believe transaction activity will continue to increase globally during the second quarter. We are registering positive numbers both in terms of new projects and data room user sessions and we expect that number to grow as many deals that were on hold are starting to pick up.

Have you spotted any interesting trends recently?

CEO Francisco Lorca said: We believe 2021 will be a big year both for M&A and for capital markets. On the capital market side, we expect continued growth in IPOs, direct listings, or SPACs. The surge in SPACs in the US market seems to be happening in the European market and beyond. We also expect the level of activity in M&A transactions to be very strong due to an abundance of liquidity and appetite for companies to adapt their businesses and grow coming out of COVID-19. Interestingly, we are not seeing the level of activity we expected in restructuring transactions. Time will tell if these come back once the governments cease to subsidize companies during COVID-19.

 

iDeals Solutions’ Chief Revenue Officer Alexander Khlevniuk

How have user volumes progressed over the first quarter across your platform?

The first months showed the traditional dynamics corresponding to the M&A cycle seasonal activities. That is, 1Q21 shows an expected decline in user volumes compared to the previous quarter.

Based on this information, can you make any projections for the second quarter?

February and March 2021 have shown positive dynamics and steady growth in M&A activity. Thus, we have all reasons to expect targeted results in 2Q21. Additionally, non-M&A use cases contribute to our growth, for instance, the growing demand for VDR application by the biotech R&D departments.

Have you spotted any interesting trends recently?

In China, for instance, the M&A market achieved double-digit growth in both value and quantity. The value of deals increased by 30%, reaching the highest level since 2016, while transactions volumes grew by 11%. We are seeing more active users from China and new domestic M&A projects registered on our platform. We can expect that this year the Chinese M&A market will be driven by Beijing’s industrial upgrading policy and the Dual-circulation strategy.

 

SS&C Intralinks’ Senior Vice President and Co-General Manager Bob Petrocchi

How have user volumes progressed over the 1Q21 across your platform?

In 1Q21, we have seen more than 5% growth in deals coming across our desks. The run rate shows real strength to start the year, translating directly into user growth and deal activity engagement. Looking at early-stage deals by region, the US and APAC are leading growth. APAC's tighter controls over COVID-19 transmissions and growing consumer confidence make business leaders more optimistic about doing deals. EMEA has the slowest pace in starting new deals, but it is still trending with the 2019/2020 levels and maintaining volume momentum. EMEA has been a little late to the IPO boom that is going on in North America and APAC. However, given some of the legislative changes that are in the pipeline, especially in the UK, it is going to have a positive impact on capital markets activity.

Based on this information, can you make any projections for 2Q21?

Our most recent Deal Flow Predictor indicates that, globally, we can expect to see greater than 10% M&A growth in announced deals in 2Q21, compared to last year. This growth outlook remains the same when looking at a quarter-over-quarter comparison.

Have you spotted any interesting trends recently?

We see an exponential increase in IPO activity, particularly in Brazil. In the US, IPO activity through SPACs has grown as well. Additionally, bankruptcy and restructuring deals are steadily following into the market as insolvencies are not protected by regulators in the US, in contrast to most of Europe and Asia. 

Further research from SS&C Intralinks 

 

VDR Insight is a new initiative from DealTech (formerly known as M&ATech), a regular feature that covers technology trends aimed at M&A professionals. If you would like to give us any feedback, please contact rupert.cocke@iongroup.com

Contacts

Media Relations
Marta Carraro

Vice President, Communications

212.367.6162

marta.carraro@datasite.com

Investor Relations
Jennifer Percy

651.632.4009

jennifer.percy@datasite.com

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