Irish companies spent record £4.7bn on acquisitions during 1999

Mergers and acquisitions activity involving Irish companies broke new records in 1999, with Irish companies spending almost £4.7 billion (€6 billion) on domestic and overseas acquisitions. And foreign companies spent almost £1.9 billion on Irish acquisitions - again a new record.

And with interest rates set to remain low and interest cover high, with most large companies operating with comfortable balance sheets and with their appetite for expansion unsatisfied, corporate financiers believe that this year will see continued heavy investment in acquisitions at home and abroad.

For the corporate financiers themselves, the surge in acquisition activity has compensated to a huge degree for the slowdown in stock market flotations, although the Eircom flotation last July represented a bonanza for AIB's various corporate finance, stockbroking and investment banking subsidiaries.

Further sales of State assets will provide decent fee income for the corporate financiers - although a bonanza on the scale of the £60 million Eircom flotation fees will not be repeated. But merger and acquisition activity generally is likely to remain busy, and fee income for the advisers substantial. It is a good time to be an investment banker or corporate financier.

Some of the biggest spenders on acquisitions in previous years are absent from the 1999 list, with both Elan and Kerry making small acquisitions by their standards. Both, however, are unlikely to remain so inactive in 2000 and markets expect substantial deals from Kerry and Elan, with both well equipped for substantial deals.

AIB was the biggest spending Irish company, with more than £1.1 billion being spent on acquisitions in Singapore and Poland. Technically, AIB doesn't have to pay the £661 million for a quarter of Keppel Tatlee Bank until it exercises an option, but for simplicity's sake this move into the Far East is included in the 1999 list.

Any doubts about CRH's ability or willingness to look for the big deal were laid to rest with the building materials group making more than £700 million of acquisitions in Europe and the US, with the £327 million acquisition of the Finnsementi/Rudus operations in Scandinavia and Eastern Europe the single biggest deal.

Previously linked mainly with small to medium-sized bolton acquisitions, CRH has in the past two years shown a much greater inclination for big acquisitions - to the extent that it is now one of the first names mentioned when any sizeable deal becomes public. Expect further action from Belgard Castle.

Last year was also notable for the completion of the two biggest management buyouts in Irish corporate history - the £578 million management buyout (MBO) of C&C and the £374 million spent by Clondalkin management and its backers when the publicly quoted packaging group was taken private. MBOs of that scale may not happen this year but there is venture capital a-plenty at home for the small and medium-sized deal and abroad for the mega-MBO's like C&C and Clondalkin.

The most innovative deal in 1999 was probably Ardagh's £283 million acquisition of Rockware, a company four times its size. This was a deal where the financial engineers were to the fore, although it has to be said that the success of the acquisition has not been reflected in Ardagh's performance on the market.

The other £100 million-plus deals were Jurys' £247 million takeover of Doyle Hotels - described as a merger but in reality a takeover - and Esat's £115 million acquisition of PostGEM/IOL from An Post. This latter transaction produced gasps at home where valuations of no more than £50 million had been put on PostGEM. But Esat's US shareholders had no such illusions and took the view that the deal was downright cheap.

The sale of a State asset was also the biggest deal involving an overseas acquisition of an Irish company when NTL paid £535 million for the Telecom Eireann/ RTE-owned Cablelink. Just behind was ADC's £533 million takeover of Savile Systems.

Other big foreign takeovers included CGU's £297 million buyout of the 70 per cent of Hibernian it did not own, KBC's £125 million buyout of the Irish Life stake in IIB and Irish Life Homeloans and TCI's £83 million acquisition of Cable Management Ireland.

Brendan McGrath can be contacted at bmcgrath@irish-times.ie