Ireland Bucks M&A Trend
While global transaction activity has softened considerably, the Irish M&A landscape is proving resilient, with financial and business services, life sciences, TMT and energy sectors leading the way, writes
Against a global backdrop of higher interest rates, elevated inflation and geopolitical uncertainly, it is unsurprising that the value of M&A activity worldwide reduced in 2023 versus the peak years of 2022 and 2021. The contraction in M&A deal values is principally due to reduced levels of large (over €500m) M&A transactions. These transactions were acutely impacted in the first half of 2023 by increased financing costs and reduced availability of funding in global capital markets.
However, in Ireland the picture for 2023 has been more positive, according to Brian Fennelly, partner, Debt & Capital Advisory, at Deloitte. “Deal volumes are only marginally down on 2022, with continued strong levels of activity in the midmarket,” he says. “Irish businesses continue to attract strong interest from international investors, both private equity and trade buyers, with the volume of inbound acquisitions up 8% for the nine months to the end of September.”
From a sectoral perspective, financial services, business services, life sciences, TMT (Technology, Media & Communications) and energy continue to attract strong investor interest. This so-called flight to quality leads to robust valuations, though sectors most exposed to the effects of cost of living increases have seen reduced activity levels.
Fennelly adds: “With interest rates now nearing their peak, and inflation levels abating, the outlook for M&A activity in Ireland in 2024 is cautiously optimistic, underpinned by continued domestic and international private equity and strategic investment, internationalisation of Irish businesses, and financing support from a profitable Irish banking sector and a growing universe of alternative lenders operating here.”
Fergal McAleavey, Corporate Finance partner in EY, recently advised on the €473m sale of a 51% stake in Cubic Telecom to SoftBank Corp. His view is that the M&A market in Ireland has held up well, with deal volumes in 2023 on a par with 2022. “After the bumper year for Irish transactions in 2021, deal activity has shown signs of stabilisation over the course of 2022 and 2023, in spite of the challenging geopolitical and macro-economic global backdrop,” he adds.
In the period to end November, EY counted c.300 transactions in Ireland. TMT has remained the dominant sector, particularly technology, with a strong performance and notable deals across other sectors such as renewable energy, and health science and wellness. “Businesses have been challenged in terms of financing deals as a result of elevated interest rates,” McAleavey explains. “However, this has started showing initial signs of cooling, giving some hope that interest rates may be peaking.”
D‘For the majority of deals, a proportion of consideration is deferred’
espite this macroeconomic volatility, McAleavey believes the deal environment will likely remain robust as structural and strategic drivers in European M&A come into play, including divestitures, technology, ESG, and PE will collectively shape the landscape.
David Fitzgibbon, partner and head of Corporate M&A at law firm Matheson, concurs that the combination of increased geopolitical and macroeconomic risk with more expensive debt financing has made it more difficult to implement large corporate M&A. “As the financing environment has begun to stabilise, we