DealTech: M&A activity holds firm despite macro conditions – VDR Insight

By Rupert Cocke with analytics by Jonathan Klonowski

A spike in new VDRs for M&A on Datasite in August and October indicates that deal activity could go up as early 1Q23, according to the platform’s CEO Rusty Wiley. Private equity firms are rushing to buy tangible assets, he added.

Datasite CEO Rusty Wiley

How has the volume of new VDRs on your platform progressed through the second half of the year?

M&A deal activity has been challenged by several macroeconomic factors, including interest rate increases, inflation, supply-chain and geo-political issues, such as the Russia-Ukraine war, which have combined to drop the year-over-year (YoY) volume of publicly announced deals in the second half. Yet new M&A deals on Datasite are still ahead of where they were last year. Global M&A deals launched on Datasite, which facilitates about 13,000 deals a year, are up 3% year-over-year, Jan 1 – Nov 25, 2022, compared to the same time in 2021. As many deals never get disclosed or disclosure is delayed, this difference suggests the M&A market is busier than the current news cycle suggests.

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 first half of 2023?   

Dealmakers are optimistic that M&A will pick up once macro-economic conditions settle. A spike in M&A deal launches on Datasite in August and October, driven by a sharp bounce back in EMEA activity, indicates we may see an increase in activity starting as early as 1Q23. In terms of sectors, industrials continue to be the story of the year, up 13% year-over-year on our platform, which means some of this activity will carry over to next year. Private equity firms are also rushing in to seize hard assets, spurring continued expansion of M&A deals in the real estate sector, which should continue to spill into next year. The technology, media and telecommunications (TMT) sector experienced a boom in EMEA, moving from neutral to positive year-to-date and year-over-year, creating a more bullish outlook for TMT in 2023.

Have you noticed any interesting trends recently?

M&A is increasing in complexity. In 2021, dealmakers ran larger, more complex processes in shorter time frames on Datasite, compared to 2020. This year, sell-side processes are taking longer to complete. Still, there are two factors that remain integral to M&A success: knowledge and speed, according to a new report from Harvard Business Review Analytics Services, sponsored by Datasite (see link below). With dealmakers needing more, faster, they are increasingly turning to technology to automate the time-consuming tasks required in managing deals, as well as help with a deeper analysis of data. In turn, this is improving valuations by helping sellers spot trends regarding a company’s products, customers, and sector, or in providing regional insights previously unavailable. At the same time, buyers are using data secured from these analytics tools to best position themselves.