Telecoms and tech firms a highlight in otherwise quiet M&A market

An overwhelming majority of Irish businesses are unsure whether they will engage in any merger and acquisition (M&A) activity over the next 12 months although the appetite for deals is stronger in the technology and telecoms sector, according to an Aon Ireland survey.

The professional services group, which polled some 281 businesses in the Republic as part of its latest M&A in Ireland survey, said that inflation remains the biggest obstacle with 55 per cent of respondents indicating rising prices remain their top concern. Some 43 per cent said high valuations were the second biggest risk to deal activity while 44 per cent cited a lack of sustainable investment options.

Global M&A activity has fallen this year against a backdrop of rising borrowing costs and tightening financial conditions. Data compiled by the London Stock Exchange Group recently showed that deal volumes involving Irish companies were down 18 per cent although the value of M&A transactions was up 48 per cent over the first nine months of the year to $33.3 billion (€31.5 billion).

About 90 per cent of Irish companies told Aon they are either less likely or unsure of whether they will consider a merger or acquisition in the coming year

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However, the appetite for deals is stronger in some sectors — including telecoms and tech — more than others. Businesses in those industries were the most active with 26 per cent considering M&A activity in the next year followed by 17 per cent of financial and professional services firms.

“Despite growth in the domestic economy, organisations continue to navigate a challenging business environment from a tight labour market, to rising operating costs and increasing levels of cyberattacks,” said Karl Curran, head of M&A and transaction solutions at Aon Ireland. “The risk landscape for Irish businesses continues to evolve at pace.”

Meanwhile, Mr Curran said the fact that some 62 per cent of companies said they consider cyber security and technology risks before concluding a deal encouraging. “Addressing emerging areas of risk such as cyber security will be critical to long-term success,” he said.

“The impact of potential cyberattacks can be deeply damaging. According to the 2023 Aon Cyber Resilience Report, major cyber incidents typically result in a 9 per cent decrease in shareholder value for businesses in the 12 months following an attack. In this context, we welcome the findings from today’s report that more firms in Ireland are prioritising cyber risk as part of M&A due diligence.”

However, many firms are still not screening for cyber risk at all and need to invest in those capabilities.