M&A climbs in third quarter as deals close after first lockdown

More muted performance expected over next six months as Covid impact and Brexit feed through

Some 90 mergers and acquisitions were finalised in the third quarter in the Irish market. Image: iStock

Some 90 mergers and acquisitions were finalised in the third quarter in the Irish market. Image: iStock

 

The number of mergers and acquisitions (M&A) in the Republic rose 55 per cent in the July to September period compared with the second quarter, according to the latest M&A study from Investec Corporate Finance.

There were some 90 recorded transactions in the third quarter, with the total value of this activity estimated at €1.7 billion, higher than in either of the first two quarters of 2020, the Investec M&A Tracker shows.

Only 27 of 90 transactions had disclosed a deal value. Notable transactions announced during the quarter included US-based Madison Dearborn Partners’ proposed acquisition of IPL for a reported €624 million, Roche Holding’s €380 million acquisition of Inflazome, and Amdocs’ €157 million purchase of Openet Telecom.

These three deals were the only ones to have a reported value of more than €100 million, and together they made up 68 per cent of the total estimated deal value in the period.

Irish companies were active overseas during the quarter, with a total of 27 transactions.

Media and publishing was the most active sector in the quarter, with 13 announced transactions. Keywords Studios was responsible for three of these, acquiring Coconut Lizard for €2 million, Maverick Media for €4 million and Heavy Iron Studios for €11 million during the period.

It was followed by IT and telecoms, which saw 12 transactions, and the professional and technical sector, which also saw 12 deals.

While the impact of the Covid-19 pandemic led to reduced volumes earlier in 2020, third-quarter activity was up year-on-year, with the 90 deals comparing with 67 in the third quarter of 2019, although the estimated value of those transactions was much higher at €4.3 billion.

Nevertheless, Investec described the level of activity as “very strong” in light of the market backdrop and implications of the pandemic, and was likely much better than market participants would have expected back in March and April.

“Easing of lockdowns, in tandem with positive economic indicators, no doubt helped participants to push forward and conclude M&A processes,” said Investec.

Deal volume

The volume of deals, up from 58 in the second quarter, was not far off the record high of 98, which was reached in the final quarter of 2019. The total is likely to have been boosted by transactions that were originally planned to close in the second quarter, Investec noted.

It forecast a likely “more muted performance” in the fourth quarter of 2020 as well as the first quarter of 2021, with buyers waiting to see the outcome of a number of macro-economic issues, including Brexit negotiations, before committing to finalising deals.

Fewer new deals and processes were likely to have started in the second and third quarters of this year than would ordinarily be the case, it added.

“Furthermore, the second wave of Covid-19 in the last few weeks has led to some renewed pessimism, with more restrictive and lengthier lockdown restrictions anticipated throughout the winter period.

“This too could have a blunting effect on any prospective M&A activity, particularly in those sectors most affected by any form of lockdown or other restrictive measures.”