Five factors likely to impact Irish M&A activity this year

Funding

"We currently have as favourable an environment as I've ever seen from a funding point of view, from banks, specialist debt funds and the private equity community, so there are plenty of options," says Liam Booth of Investec. "That there was a need for new options was borne out by the financial crisis and the NTMA [National Treasury Management Agency] and ISIF [Ireland Strategic Investment Fund] should take credit for having stimulated that market. Enterprise Ireland has done quite a lot to back earlier-stage VC firms as well, so various arms of the State have been very good at creating this environment. It creates a backdrop of confidence for future M&A activity in 2018."

Valuations

“Valuations are high and there is a lot of private-equity interest, from both domestic and international funds,” says Eamonn Hayes, managing director of Capnua. “Previously, much of what we were seeing was purchasers buying distressed businesses. It was simply by virtue of where we were at economically. But what we are seeing now is the purchase of healthy, growth-oriented businesses by private equity firms such as Carlyle Cardinal Ireland MML. Mid-market private equity firms from the UK are in Ireland looking at stuff on a regular basis too. And where historically there would have been a lack of familiarity with private equity here, that is changing. The more deals that take place, the more curious business owners are becoming about it as an option.”

Sentiment

"Confidence is key and at the moment market sentiment in Ireland and internationally is very strong," says Nicholas O'Gorman, director of Davy Corporate Finance. "If you were thinking of coming to market, the timing is very favourable in that we have had a number of years' growth and strong economic activity. That's good because, to make a sale, you have to leave something behind for the next guy and the medium-term outlook is strong. If you were ever considering selling, now would be a good time to do it. A lot of people have learned lessons from the last time around. They realise that waiting until an economic collapse is not the way to go."

Demographics

“It’s now a decade since the financial crisis started. There are business owners who might have lost the opportunity to sell their business during the recession. The passage of a decade will bring more people looking to exit to the fore,” says Eamonn Hayes of Capnua.

"The fact that valuations are high and funding availability is good has brought forward a number of sales and management buy-outs, often from business owners that have held off as a result of the recession. We have seen significant growth in the number of such cases," says Katharine Byrne, partner and head of the BDO Corporate Finance Team.

Disruption

“There have always been two motivators behind M&A. Either it’s an option to acquire and accelerate your business, or it’s an opportunity to consolidate your market position and to achieve economies of scale. Now, however, a third factor is coming to the fore,” says Liam Booth of Investec.

“More and more industries are being challenged by technology. The threat of disruption is one we heard of more and more in 2017, in some sectors – such as retail – more than in others. The result is that a third factor now driving M&A activity is a defensive one. It’s about the acquisition of a business that has a technology that will enable your business to withstand threats from technology, or the acquisition of a business that has a technology that will provide you with a different route to market.”