Stable interest rates could boost M&A, say corporate financiers, as Irish deal-making rises 5.5%

Stabilising interest rates could boost mergers and acquisitions (M&A), corporate financiers say as new figures show Irish deal-making rising despite falling numbers of transactions globally.

Irish mergers and acquisitions reached 116 in the three months ending on September 30th, up 5.5 per cent on the same period last year, according to the Davy Corporate Finance Quarter 3 M&A review.

M&A activity fell 29 per cent globally in the third quarter, says the report, which notes that a “mere 7 per cent” slip in the Irish total for the first nine months of 2023 – to 311 – shows the market here remains resilient.

The Davy review, published on Friday, predicts that the trend will continue here through the last quarter, which is traditionally a strong period for deals.

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Jonathan Simmons, director of Davy Corporate Finance, said the third-quarter figures were better than most in the market would have predicted a year ago. “The macro picture here is good and it’s stable,” he added.

He noted that the firm favoured the number of deals done as a measure of the market’s health over the value, as one or two very big transactions can distort this.

His fellow director, Barry O’Donovan, said that if interest rates stabilised at a new baseline, this would encourage more M&A activity.

The firm’s report states that the more optimistic outlook for next year indicates stabilising borrowing charges “encouraging an uptick in transactional activity”.

The median value for deals done during the quarter was €34 million. Mr O’Donovan pointed out that Irish transactions generally fell into the €25 million to €40 million category.

“We see a lot of deals done around that level,” he added.

The €18.7 billion merger of Smurfit Kappa with US player WestRock was the biggest deal done during the quarter.

Kingspan’s €400 million purchase of Steico, Flutter’s €140 million plunge for Maxbet and Axa’s €650 million takeover of health insurer Laya, also featured in the third quarter’s top 10 transactions.

However, Mr Simmons noted that non conventional private equity players, including family offices, continue to be responsible for a lot of Irish deals, with some of them completing several deals through the quarter.

Technology and telecoms were the most active sector during the quarter, according to the report.

Irish businesses acquiring companies overseas “represented the highest percentage of transaction volumes by type” during the first nine months of the year, the Davy review states.

During the third quarter, the Kingspan and Flutter deals, were notable examples of this, it adds.