Online Deal Sourcing: The New Normal for M&A

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Online deal sourcing is becoming the “new normal” as one in three dealmakers use specialised deal networks

Intralinks Holdings, Inc. (NYSE: IL), a global content collaboration company for high-value content and processes, today revealed the results of its latest Intralinks Dealnexus survey of more than 700 merger and acquisition (M&A) professionals. The “Deal Networks and the Evolution of Getting M&A Deals Done” global survey sheds light on the growing use of social networks and online deal sourcing communities as a way to improve the close rates and volume of deals, while making it easier for more organisations to promote and compete in these transactions.

In 2013, Intralinks conducted a global survey of M&A dealmakers to understand how technology and specialised deal networks influence M&A deal sourcing. Intralinks conducted a follow-up survey to measure how attitudes towards, and adoption of, these technologies have shifted since the last report. Highlights of the follow-up survey include:

Online Deal Sourcing Is the “New Normal”
More than 31 percent of dealmakers currently use an online deal network to support deal sourcing. Of sell-side M&A professionals using online sourcing platforms, nearly 50 percent have marketed at least one deal online in the last 12 months and 28% have marketed more than five deals online in the last 12 months.
Awareness of the Value of Online Deal Sourcing Is Growing

36 percent of respondents agreed with the statement that online deal sourcing will eventually revolutionise the M&A industry. In 2013, that number was only 23 percent.

Online Deal Sourcing Leads to Closed Transactions
Among users of deal sourcing platforms, 45 percent of buy-side and 39 percent of sell-side professionals have closed a deal that was sourced on an online network.
Online Deal Sourcing Expands Reach to New and Qualified Counterparties
62 percent of deal-makers agreed that online deal sourcing allows them to identify counterparties they otherwise would not have found.
Conventional Social Media Platforms Are Losing Favour
At least in terms of supporting dealmaking activities, dealmakers are eschewing the larger, conventional social networks in favor of “specialised” deal networks with more customised functionalities, with respondents citing lower daily usage of the former, but higher daily usage of the latter.

Our survey shows that dealmakers are realising the importance of incorporating online deal sourcing into their broader dealmaking and social media strategies. This is especially the case as online deal sourcing networks continue to gain ground while social media businesses continue to soar. On the buy-side, nearly 85 percent of respondents who use deal sourcing networks reported that they source deal opportunities online and 44 percent reported that their firms source between 11% and 50% of their total deal flow online.

“As online deal sourcing continues to go mainstream, it is more critical than ever for M&A professionals to at least gain an understanding of the online deal sourcing landscape,” explained Tony Hill, director of Intralinks Dealnexus. “In an otherwise fragmented industry, online deal sourcing networks offer the only true ‘gated’ communities of any substantive scale where qualified dealmakers can find one another and interact. After surveying members of the largest dealmaker community in the M&A industry, our research proves that the prevalence of social dealmaking within the M&A industry is rising.”

Donald W. Grava, founder and president of Versailles Group, Ltd, a Boston-based investment bank, said: “The most important thing in middle market M&A transactions is to make sure that the buyer or seller receives exposure to as many targets or buyers as possible.

“Digital tools, such as Intralinks Dealnexus, provide an excellent way to expose a transaction to multiple parties virtually instantaneously. The same type of coverage that Intralinks Dealnexus provides would take an enormous amount of time and resources. Intralinks Dealnexus generated exposure to almost 400 possible buyers for a single transaction we posted. That’s the power of a robust tool like Intralinks Dealnexus in the digital age.”