MBOs treble in value in first half

A series of large management buyouts (MBOs) drove the value of Irish merger and acquisition (M&A) deals to almost €2.4 billion in the first half of the year, but activity is likely to slow dramatically over the next six months, according to a report published yesterday.

The Ion Equity quarterly M&A report said the total value of deals for the last six months was €2.39 billion. But €2.07 billion of this occurred during the second quarter, thanks to the completion of a series of large MBOs of listed companies. These included Arnotts, Riverdeep and Alphyra.

The value of MBOs during the second quarter trebled from its 2002 level of €228 million to €748 million.

The largest single deal in the last three months was the €320 million buyout of Riverdeep.

Building materials group CRH was responsible for the largest overseas acquisition, the €189 million purchase of SE Johnson in the US. The group spent a total of €550 million in the first half of 2003, more than 20 per cent of the total.

IT and telecoms accounted for 28 per cent of all deals, largely due to Riverdeep and Alphyra.

However the overall value of Irish M&As for the first six months of the year is 16 per cent down on the same period in 2002, when deals totalled €2.86 billion. The report warned that there would be a sharp decline throughout the rest of the year.

It pointed out that the main reason for the increase in activity during the first six months was the finalisation of "the more obvious take-private deals, Riverdeep, Alphyra, Conduit, Sherry Fitzgerald and Arnotts".

It added that the immediate future would see the number of such deals fall significantly. However it also said that there were opportunities for management teams to take advantage of low asset values and credit costs to take control of the companies they ran.

Commenting on the report, Ion Equity director, Mr Joe Devine, predicted that consolidation in a number of sectors would create further M&A opportunities.

"We still see scope for consolidation and restructuring in areas such as the financial services and agribusiness sectors," he said.

"The support services sector will also see significant corporate activity as Irish companies and the public sector follow the clear trend set in the US and UK of outsourcing non-core activities."