Strong Irish M&A activity likely to continue into 2015

Strong mergers and acquisition activity in 2014 is expected to continue into this year, according to Investec Corporate Finance.

Greater confidence in an improving economic environment alongside better access to financing will facilitate improved deal volume, Investec says, driven by an ongoing trend of disposals by companies of non-core assets, foreign acquisitions by large Irish corporates and demand for Irish technology companies from both international trade players or tech-focused private equity groups.

Private equity, in general, will also be a trigger for deals amid the renewed focus on Irish-owned assets by foreign players, the emergence of a number of indigenous private equity players and a wider availability of debt financing.

Last year saw the number of M&A transactions top 200 again, following a dip to 193 in 2013. The total disclosed value of the 212 deals done last year fell by a third to about €10.7 billion. The 2013 figure was inflated by a number of transactions involving Elan that accounted for around €8.5 billion, or more than half the total deal value in that year.

Transaction value

The top 10 deals of 2014 accounted for about €7.5 billion, or 69 per cent, of total disclosed deal value for the year. Not unusually, transaction value was not disclosed for a large number of deals, with 58 per cent of all deals not reporting values.

Of those that disclosed deal value, deals under €20 million were the most prevalent, accounting for over one in five of all M&A business. Deals with a value of more than €500 million accounted for just 2 per cent of M&A by volume but 44 per cent by value.

In terms of deal value, health and pharmaceuticals was the most active sector for M&A last year, accounting for 22 per cent of the total deal value.

Another significant sector was IT and telecoms, which accounted for 18.9 per cent of total deal value, reflecting Ireland’s strong international position in the sector relative to other sectors of our economy.

IT and telecoms also recorded the highest number of transactions with 51 in total, or a quarter (24.1 per cent) of all deals done during the year.

Foreign acquisition by Irish companies remains the single largest category with 71, although that figure is down on the 76 foreign acquirers in 2013.

Disposals

A notable trend in 2014 was the disposal of non-core assets by Irish companies. Possibly the most significant of these was that undertaken by CRH.

The emerging trend of recent years involving a change in ownership of businesses as a result of a restructuring and/or sale of their debt obligations continued, with Siac Holdings, the Beacon Hospital, retailer Elverys and a large number of hotels changing hands

The year got off to a strong start with the €5.7 billion in transaction value, the highest in any three-month period during the year.

Among the significant deal in the first quarter were several involving companies taking advantage of the competitive corporate tax environment in Ireland.

The first months of the year also included the acquisition of Bord Gáis Energy by Centrica for €1.1 billion, which was the most significant sale of a semi-State corporate asset by the State since the privatisation of Aer Lingus in 2005.

The second quarter was characterised by a healthy flow of low-value transactions with 48 deals recording an aggregate value of €594 million, while the third quarter was the most active in terms of the number of M&A deals, with a total of 60 deals recorded, representing €1.5 billion of disclosed deal value. Jonathan Simmons is a director at Investec Corporate Finance