Matt Porzio, Vice President of Strategy & Product Marketing for Intralinks has a unique perspective on the M&A market. Intralinks maintains the leading due diligence secure data room service in the world and, as such, has a window on a high percentage of global M&A activity as deals are being made.  Additionally, Intralinks offers a global deal networking service, DealNexus, through which thousands of buyers are provided a window on available offerings, particularly in the middle market. Using this unique position Intralinks publishes quarterly its Deal Flow Predictor gauging future M&A announcements based on the trends its sees in the usage volume of its services.  Matt’s observations on the current M&A market are presented below.

The M&A market for 2015 is looking bright – kicking off with a stellar start. According to Thomson Reuters, Q1 2015 saw over $854 billion in activity – the strongest quarter since 2007. Mid-market (deal valuation up to $500 million) deal volume was at $188.4 billion, with a year over year increase of 6.2 percent. From all indications, M&A will continue to be a leading growth strategy for companies, with rich exit multiples.

Multiple deal drivers are contributing to this rich environment, including activist pressure on strategics to tighten up balance sheets/refocus on core business lines.  Distressed sectors such as oil & gas are bringing a sizeable number of mid-cap deals to market, and the strongest volume of Q1 cross border activity since 2007. Financial sponsors, with plenty of dry powder, are also out to market in full force. According to Thomson Reuters, Q1 saw $171.3 billion in sponsor-backed deals – again the highest volume since 2007.

With financial sponsors coming in with plenty of dry power, deal-makers entering this space must have deep pockets and creative earn-out mechanisms in place in order stay competitive in any M&A situation. According to Intralinks’ Deal Flow Predictor (DFP), we anticipate US Q3 2015 announcement activity to be up 13.2 percent year over year.  US deal makers should be keen to take advantage of an environment where interest rates are low and stock prices are at near record highs to actively pulse-check the market for opportunities.

Combined with steady economic growth, favorable interest rates and a strong U.S. dollar, levels of U.S. M&A activity will be healthy for sellers. If you’re a mid-market company exploring exit opportunities, keep these five things in mind:

• Understand your audience – Remember to target partners that are strategic moves for your company. Create a pipeline that includes smart, targeted affiliates.

• Be ready for a market event – The end goal of any deal is unlocking and realizing value. Deal success can suffer if you don’t remain market-ready. Being agile in a consistently fast-paced market means you need to be refreshing teasers, confidential information memorandums (CIMs) or other marketing materials, as well as being “diligence” ready. Get in the habit of positioning yourself to react immediately to market events.

• Expand your contacts – With endless information at your fingertips, opportunities to network reach far beyond whom you might know. Use the deal-networking/sourcing platforms, broadening your networks past your connections and geography.

• Ask for advice – Companies should seek experienced financial advisors who can provide sound, realistic valuations and expectations of M&A multiples. Continually attempting to sell your company without a solid understanding of industry multiples and market appetite can distract management, de-moralize employees and ultimately turn away strategically viable suitors.

• Gain competitive knowledge – Your company may be ideally positioned for an exit, but how many competitors are in your space? Situational and competitive awareness allows you to understand what current deal-making sentiments are and allows you to make informed decisions on timing your deal.

— Matt Porzio, Vice President at Intralinks, June 2015