Doing deals during the pandemic
Top 1000: Despite the challenges, mergers and acquisitions continued at pace over the past year
Food group Valeo owns Batchelors beans.
Deals may have come to a sudden halt when the Covid crisis hit last March but they soon got back on track again a short time later, with 2020 ending up a bumper year for transactions in the Republic.
Overall, there were 490 deals during the year, according to figures from Experian. This marks an almost 8 per cent rise on the number of transactions carried out in 2019 and was the highest annual figure recorded during the decade. The value of deals was down by almost a third versus 2019 but the total value of Irish M&A still totalled €55 billion, an impressive return all things considered.
The biggest deal in 2020 saw Dublin-domiciled Willis Towers Watson agreeing to be acquired by London’s Aon - in a €26 billion transaction. Other notable transactions included Paddy Power parent Flutter, which raised €894 million via a rights issue to support its online gaming operations, before launching a €3.9 billion bid to acquire a stake in the US fantasy sports operation Fan Duel.
The appetite for deals slowed at the beginning of this year in volume terms but a number of multi-billion euro transactions - such as Aercap’s €26 billion acquisition of GE Capital Aviation Services - took the value of Irish deals to their highest first quarter total in more than a decade.
The total value of Irish deals reached €58.6 billion for the first three months of the year, up 105 per cent versus the same quarter in 2019 and higher than the whole of 2020.
“At the outset of the crisis, there was generally a concern over deal flow, but in general, that concern fell away as it became clear, quite early on, that investors and buyers were still keen on moving on good opportunities and to support portfolio companies in need of capital. We have seen this in particular in the technology and energy sectors,” says Eoghan Doyle, a partner at Philip Lee.
“In the main, from what we are seeing, private equity funds and industry players are the most active on the acquisition front, and technology companies are being supported by venture and growth capital funds. When it comes to “Irish deals”, there is a large international dimension to them, with overseas investors, buyers, and their advisors playing pivotal roles, and often an “Irish” business will have assets, customers, staff etc, in multiple jurisdictions,” he adds.
Food group Valeo, which recently breached the €1 billion sales milestone due in part to increased demand during the Covid crisis, has been one of the big acquirers lately. The Jacob’s biscuits and Batchelors beans owner, which has itself just recently been acquired by Bain Capital for over €1.7 billion, completed two recent big deals. It acquired German confectioner Schluckwerder in January and British tortilla chip firm It’s All Good a month earlier.
“Navigating and executing these transactions during a global pandemic was a challenge, especially in the context of international travel and other restrictions, but we adapted, remained flexible and worked our way through what was permitted, leaning heavily on technology to ensure our processes remained as thorough as always,” says Eamonn Broderick, group head of M&A, Valeo Foods.
“In response to the pandemic, the M&A industry has adapted and evolved. It will be interesting to see what new practices will stick. We have certainly learned a lot from our recent experiences and will continue to improve our methodologies based on these learnings,” he adds.
As Andrew Tzialli, also a partner at Philip Lee, notes, despite the pandemic, it has been a case of willing sellers willing to be acquired rather than a series of distressed sales.
“While there was an anticipation 12 months ago that there would be increased numbers of companies forced to sell, we haven’t seen a significant trend to suggest that is the case, with the government stimulus packages that were quickly put in place perhaps mitigating the extent to which businesses were forced to go down this route,” he says.
Tzialli adds that while venture capital investors have in some cases been required to provide additional funding to portfolio companies to maintain stability, this isn’t always the case.
“Conversely, many businesses we work with that have been less impacted by the pandemic – such as those in technology, cryptocurrency and retail-tech, energy/renewable energy, and Covid-focused pharmaceuticals – have also raised funding to accelerate the considerable growth that they have experienced,” he says.
Tzialli cites the recent $215 million acquisition of Aqua Comms, a Dublin- headquartered company that operates a sub-sea transatlantic fibreoptic cable that link the US to Europe via the Republic, as a good example of deals that are in focus.
“What is evident right now, is that, if a company has a product, service that makes life easier for their users/customers, they are in high demand – we saw this in the Aqua Comms deal where online connectivity has never been in more demand, or more generally, where companies can add huge efficiencies to their business customers through technological products and services,” he says.
“In addition, the old reliable factors are still key, such as long term returns generated from tangible assets. In this regard, and at a time where climate change has never been higher on the agenda - renewable power is particularly of interest for investors and buyers right now,” Tzialli adds.
The Top 1000 magazine and listings is published on Friday 11th with The Irish Times.