Growth in Irish Companies Making Overseas Acquisitions Drives Strong 2015 M&A Value

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Growth in Irish Companies Making Overseas Acquisitions Drives Strong 2015 M&A Value

March 11, 2016

The fifth annual William Fry M&A Review reveals a vibrant mergers and acquisitions (M&A) scene in 2015, with a significant rise in deal values, from €45.3bn in 2014 to €189bn in 2015, although a drop in deal volume, from 120 in 2014 down to 104 in 2015.

These figures include the ‘megadeal’ of the Pfizer acquisition of Allergan announced in November 2015, which was worth €172.6bn. Excluding these deals, Ireland’s M&A sector still recorded a significant increase, with value up 41% on 2014, from €11.4bn to €16.1bn, with the largest deal being Bohai Leasing’s purchase of Avolon Holdings, for €6.5bn and the second largest the purchase of King Digital Entertainment by Activision Blizzard, for €5.3bn.

Outbound deals account for 50% of transactions

The most notable trend in 2015 is that half of all transactions with an Irish element were outbound, the highest on record for Irish businesses making overseas acquisitions and higher than recorded in other countries such as France (31%); Germany (29%) and the UK (28%). Although outbound deals accounted for greater volume of transactions, inbound deals dominated by value, with nine out of 10 largest deals by value in 2015 involving foreign bidders – four from the US; three from Europe and two from Asia-Pacific.

Greater access and choice in finance

Much of Ireland’s continued growth in M&A can be attributed to greater access and choice in source of finance, reflecting a return to more stable investment opportunities. This access to affordable finance was due in large part to the ECB’s quantitative easing programme which released €1.1tn and made it more affordable to borrow from the banks. Ireland continues to attract capital from other sources including debt financiers and private equity. This trend of debt funding is likely to continue in 2016.

TMT sector dominates, business services and property sector deals double

Whilst the overall deal value figure is up, the number of deals recorded in 2015, at 104 is down by 14% from the 120 recorded in 2014. There has also been change in the sectors recording the highest volume of deals, with TMT accounting for almost one-third of the deals recorded in Ireland, at 29%. The next greatest volume was in the leisure services sector, accounting for 13%, with notable deals including Lone Star’s purchase of Jurys Inn for €900m and the €30m acquisition of Adare Manor by the McManus family.

Deals in the property sector also continued to recover in 2015, recording 6% of overall volume, up from 3% in 2014 and the highest recorded since 2007. Over 500 construction projects commenced last year and there were strong levels of investment, €3.7bn, in commercial property, including the much publicised sale of the Project Jewel portfolio by NAMA for €1.8bn. 2015 also saw a doubling in the number of deals involving the business services sector, from 6% in 2014 to 12% in 2015.

The Pharmaceutical, Medical and Biotech sector accounted for 12% of the volume of deals although 92% of overall value as a result of the Pfizer / Allergan €172.6bn megadeal. This sector continues to be a strong feature in the M&A market in Ireland, with companies such as Endo International, Shire and Mallinckrodt all focusing on growth by acquiring important new drugs rather than relying on slower paced in-house development.

Commenting on the review, Shane O’Donnell, Head of Corporate and M&A at William Fry said: 2015 saw the highest ever level of outbound deals, showing Irish businesses are now strong and confident enough to grow their global footprint. We also saw a change in the mix of sectors recording deals, with technology, media and telecommunications dominating deal volume for the first time ever, reflecting the fast-paced evolution of these businesses and the opportunities being seized by mid-market sized firms to either grow through acquisition or to sell their business.”

“This growth in deals has been encouraged by the easier access to affordable funding in 2015, largely driven by the ECB’s €1.1tn quantitative easing programme. Whilst the global macro-economic outlook for 2016 shows uncertainty over the varying degrees of recovery across Europe and the slowing down of China’s economy, Ireland is still forecast to experience economic growth and we would expect M&A deals to continue strongly this year.”