Special Report
A special report is content that is edited and produced by the special reports unit within The Irish Times Content Studio. It is supported by advertisers who may contribute to the report but do not have editorial control.

A ‘banner year’ for M&A activity across Ireland

Sales included CPL Resources, Valeo Foods, Panda Group and United Drug

Last year was a “banner year” for M&A activity, breaking all previous records, according to Peter Bennett of Davy. The senior partner attributes this to renewed board and C-suite confidence as the vaccine rollout progressed and a globally co-ordinated fiscal stimulus was in situ, with GDP on an upward trajectory following the Covid sharp shocks of 2020.

“Coupled with the above, ultra-low interest rates, high-stock prices and healthy corporate financial profiles all contributed to a strong backdrop for M&A,” Bennet explains. A new peak in activity levels saw over 63,000 transactions take place globally in 2021, a 25 per cent increase on the previous year.

This was because the "bounce back" seen in the latter half of 2020 continued into 2021, says Katharine Byrne, partner with BDO. "The level of corporate transactions during 2021 has been exceptional not just because of the number of deals completed but also because of the valuations achieved. There were multiple transactions with deal values in excess of €1bn, including sale of well-known Irish companies such as CPL Resources, Valeo Foods, Panda Group and United Drug."

Andrew McIntyre, partner in William Fry’s Corporate Department and Head of FDI, agrees. “There was significant appetite from businesses globally to expand and seek new opportunities in the search to deploy capital last year.”

Indeed, these features of the global market were mirrored by the activity seen in the Irish market during 2021; volumes breached the $100 billion level with nearly 700 announced transactions. But, according to A&L Goodbody partner and head of M&A Richard Grey, one of the most notable features in the Irish M&A market last year was the sheer speed at which transactions were executed.

“Given the level of competition in sale processes, a large number of which were conducted through an auction process, prospective purchasers were keen to distinguish themselves from other bidders. This desire translated into a willingness to execute deals in an accelerated timeline leading to shorter due diligence and negotiation periods,” Grey explains.

Outside these 'hot' sectors we continue to see strong appetite for M&A across most sectors as both trade and PE buyers look to target businesses in growth markets with strong management teams

Byrne adds that the “scale and ambition” of Irish businesses attracted significant international interest, resulting in record-breaking valuations such as sale of E&I Engineering for €1.8bn and the €600m investment into Fenergo.

Blockbuster deals aside, Jan Fitzell, partner, Mergers & Acquisitions, Deloitte, says most of the activity in Ireland is in the mid-market – the €30-150 million value range. "There a huge amount of volume in this space."

Seasoned M&A observers agree that three core industries drove this unprecedented level of activity as the Covid dust settled– namely healthcare, financials and technology. These were, perhaps unsurprisingly, the most resilient sectors throughout the pandemic and this translated into investor confidence.

“Anything with recurring, highly visible revenues and good contractual underpin was really attractive,” says Fitzell. “The theme of the year was resilience.”

His colleague, Anya Cummins, partner, Mergers & Acquisitions and Head of Deloitte Private, agrees. "Businesses that had been resilient and were now growing, raising capital, internationalising, disruptors in the market who were driving growth on the back of changing consumer preferences and behaviours all had strong valuations."

The tech sector remains the most active, accounting for approximately one in four transactions in the Irish market. “High levels of activity in this sector were driven by a combination of very strong valuations, a significant level of private equity interest, both European and US in strong Irish targets and an increased level of activity by strategic buyers in the sector,” Grey explains.

Fitzell agrees: “In the last 12 months we have seen a lot of international acquires looking at Ireland as a new market for them to enter – buying a technology or a service capability that they can then plug into their own customer base.”

Business services has also been a particularly active sector for private equity buyers with a lot of consolidation opportunities at the lower end of the mid-market, BDO’s Byrne notes. “Over the last few years, the financial services has remained a hot sector for consolidation, particularly the sub-sectors of insurance and wealth management with increasing valuations as private equity-backed groups look for bolt-on acquisitions,” she says.

Healthcare consolidation also continues apace, with international acquirers seeking out quality targets globally including in Ireland, Bennett adds, noting Icon plc’s acquisition of PRA Health in a $12 billion deal.

“Outside these ‘hot’ sectors we continue to see strong appetite for M&A across most sectors as both trade and PE buyers look to target businesses in growth markets with strong management teams,” BDO’s Byrne adds.

Grey points out that 2021 also saw a number of large Irish deals in the food sector: two of the most material transactions being the acquisition by Pilgrim's Pride of the Kerry Group's consumer foods business and the spin out of the Glanbia Ireland milk-processing business by Glanbia plc to Glanbia Co-Op.

The record-breaking levels of M&A in Ireland last year not only signals the confidence in Irish companies but also highlights the ambition and ability of Ireland's SMEs

And it’s not just large corporates or tech scale-ups that are attracting international interest. Mid-market companies and traditional businesses are also benefiting from increased valuations underpinned by increasing levels of capital seeking investment returns. Cummins also points to the increasing role played by private equity in the Irish M&A market. “Private equities came back to play a bit quicker because of Covid – this had happened at the end of 2020 and it kept going last year,” she says. “We saw a lot of Irish funds raise new funds and make their first acquisitions out of those funds. When we look at our pipeline for this year we are seeing a huge amount of private equity activity with owner-managed businesses raising funds for growth.”

McIntyre says the desire of private firms to do deals also supported the top end of the Irish M&A market – 2021 saw the private equity sector behind 66 M&A transactions in Ireland, nine more than in 2021. “With PE firms coming into 2021 with over US$2tn, the Irish M&A market recorded an extremely busy year.”

As 2022 progresses, many of the conditions favourable to high levels of M&A activity remain in place. “The record-breaking levels of M&A in Ireland last year not only signals the confidence in Irish companies but also highlights the ambition and ability of Ireland’s SMEs to scale-up and compete on the global stage,” Byrne says.

Long-term, the M&A market is showing signs of a “secular up-trend”, according to Bennett, one that he says is supported by an ultra-low interest rate environment coupled with the fiscal support experienced over the last decade and beyond.

“While M&A has its own ups and downs in any given year, the data suggests long-term growth in M&A activity over time. In the 2000s a typical year saw $3.0-3.5 trillion of deal value and approximately 30-35,000 deals a year. In the 2010s this continued to grow, and in the 2020’s so far we have seen over $4.5 trillion plus of deal value and 45,000 deals a year.”

The big deals of 2021

  • AerCap's acquisition of GE Capital Aviation Services ($31bn) (aircraft leasing)
  • Icon plc's acquisition of PRA Health ($12bn) (healthcare)
  • PTSB's and AIB's acquisition of Ulster Bank assets (financials)
  • CD&R's acquisition of UDG Healthcare (3.4bn) (healthcare)
  • Bank of Ireland's acquisition of Davy (~€0.5bn) (financials)
  • Bridgepoint's stake acquisition of Fenergo (~€0.5bn) (technology)