Surge of foreign cash drives Irish M&A to Celtic Tiger highs

The strong recovery of the Irish economy and an overhang of deals, delayed from the first year of the pandemic, drove mergers and acquisitions (M&A) activity last year to levels not seen since the height of the Celtic Tiger, according to a new report.

The total value of Irish M&A deals in 2021 rose by a third to €24.6 billion across about 240 transactions, the most since 2006, according to corporate law firm William Fry’s annual M&A Review, which it produces in partnership with corporate data firm Mergermarket.

An influx of foreign capital drove much of the deal-making, with all but three of the top 20 largest deals involving buyers from abroad acquiring Irish-based companies. US buyers accounted for €13.2 billion worth of transactions. The financial services and technology and media sectors accounted for close to 60 per cent worth of deal value between them.

Rates

As historically-low interest rates continued to limit opportunities for institutions to generate returns elsewhere, a near €108 billion wave of private equity cash, most of it from abroad, washed over the Irish market. This included Clayton, Dubilier and Rice’s €3.4 billion acquisition of UDG Healthcare.

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However, the single largest M&A deal in the Irish market in 2021 was a domestic affair involving two Irish banks, as AIB paid €4.1 billion to acquire a commercial loan book from Ulster Bank.

William Fry said there were 10 "megadeals" worth more than €500 million each. The bulk of M&A transactions, 81 per cent, were worth €5 million-€250 million, which the law firm said was a signifier of the strength of the rebound in the domestic economy.

The number of "Irish on Irish" domestic deals was about 68, according to the research, up from 51 deals the previous year. However, Stephen Keogh, William Fry's head of corporate and M&A, said that the scale of domestic deal-making hadn't risen as quickly as deals funded from abroad.

Deals

Mr Keogh said that some of last year’s deals were “definitely held over” from 2020, when the pandemic began: “But it would be misleading to say that it was a large portion. Deals did get paused when the pandemic first hit but that pause ended in the second half of 2020, and the momentum kept going.”

Mr Keogh acknowledged that if inflation persists and the European Central Bank moves quickly to raise interest rates, it might eventually have a dampening effect on corporate deal-making. But, he said, this would not take effect until 2023 or 2024.

He predicted another strong year for M&A, although 2021’s level of activity would be “difficult to sustain”. He also warned that the eventual withdrawal of Government financial supports for the hospitality industry might “be a catalyst” for some badly-affected businesses in that sector to be sold.