2017 proved to be an extremely strong year for Irish merger and acquisition (M&A) activity according to the seventh edition of William Fry’s Annual M&A Report published today. A total of 143 deals worth €14.9bn were announced over the year, representing a 5.9% increase in volume.
Private Equity (PE) dealmaking experienced impressive growth during 2017 with a total of 37 deals worth €12.2bn, more than double the value of all announced PE deals in 2016. Midmarket deals accounted for 93.5% of total volume, up from 82.4% in 2016 while inbound dealmaking expanded in 2017 to 93 deals worth €14.4bn. This inbound activity also spanned a variety of sectors highlighting the diverse range of growth-oriented businesses coming to market.
Shane O’Donnell, Partner and Head of Corporate/M&A, noted, “The strong M&A activity in 2017 is renewed evidence of Ireland’s strong economic growth, its business-friendly environment, and increased access to capital. A relatively low corporate tax rate, a flexible and multi-lingual workforce, and a transparent legal system continue to underpin Ireland’s attractiveness as a hub for overseas investment and are drawing interest from overseas buyers. In addition, we also saw a healthy increase in outbound activity as Irish firms looked to international acquisitions.”
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Private Equity deals soar
PE activity displayed impressive growth in 2017, with firms fighting off competition from strategic buyers in order to secure equitable stakes in successful Irish businesses. In 2017, there was a total of 37 announced PE deals worth €12.2bn representing a 141% value increase compared to 2016, and with deal volume reaching its highest annual total on record. International acquirers accounted for the bulk of this activity, with the top ten PE deals of 2017 all conducted by overseas bidders.
Record level of Inbound activity
Interest from foreign investors continues to act as a major driving force behind Irish M&A activity. A total of 93 deals worth €14.4bn conducted by overseas acquirers in 2017 has the highest annual volume on Mergermarket record (since 2001). The largest inbound deal was Canada’s Vermillion Energy and Luxembourg-based holding company CPP Investment Board acquisition of a 45% stake in Royal Dutch Shell’s Irish gas assets in a deal valued at €830m. Inbound activity in the financial services sector was also popular, attracting four of the top 10 inbound deals of the year.
Megadeals were less prevalent in Ireland in 2017, with just three deals with a disclosed value of over €500m announced during the year. This was down from a record 10 transactions in 2016, when a flurry of tax inversion deals served to increase overall deal value. Irish M&A value in 2017 was dominated by Dubai Aerospace’s €6.9bn acquisition of Dublin-based AWAS Aviation Capital – the largest deal of the year. In second place was French telecom company Iliad’s €3bn acquisition of a 64.5% stake in eircom group.
Rise of FinTech
2017 saw a surge of activity in the fintech sector, a continued important driver of Irish M&A activity. Strategic buyers and PE investors are attracted by potential growth prospects and the willingness of financial services companies to collaborate on investment deals. A key deals in this sector was Allied Irish Banks €30m investment in payments fintech firm TransferMate.
Sharp rise in consumer deals
Deal volume figures display an even spread of activity across other sectors, representing the diverse range of M&A opportunities available. The consumer sector experienced the sharpest rise in deal volume year-on-year – increasing from 8% to 13%. The largest sector deal saw Church & Dwight acquire hair growth vitamin supplement producer, Viviscal, from Irish beauty products company, Lifes2good, for €150m.
TMT sector continues to expand
The technology, media and telecommunications (TMT) sector continues to account for a healthy proportion of deals (15% of volume and 25% of value). Apart from Iliad’s acquisition of a 64.5% stake in eircom, the next highest valued deal of the year in the TMT sector was Vector Capital’s €281m purchase of Experian’s cross-channel marketing business and Australian investment firm AMP Capital Investors’ €156m purchase of a 78% stake in telecoms firm E Nasc Eireann Teoranta (enet).
Outbound M&A saw its share of volume increase in 2017 – from 39% to 42%, with a total of 93 deals worth €9.4bn. This sector was dominated by large Irish corporates with the appetite and the funding capacity to consolidate their market position and achieve efficiencies through bolt-on acquisitions. Reflecting this trend, three of the top five deals of the year were undertaken by global building materials group CRH Plc, which employs an estimated 87,000 people at around 3,800 locations worldwide.
Outlook for 2018
Looking ahead, Shane O’Donnell concluded by saying, “We expect Ireland to remain attractive to international investors this year, however, uncertainty remains. The ongoing Brexit negotiations will be closely monitored by dealmakers while the ECB’s winding down of its QE program over the coming months may constrain their ability to access capital in 2018. Ireland will also face new challenges in attracting foreign investment due to sweeping changes to US tax rules. Despite this unpredictable macroeconomic climate, it is expected that Ireland’s strong economic fundamentals will continue to outweigh external destabilising factors and that 2018 will continue to see healthy levels of M&A activity. For Ireland, the M&A outlook appears bright.”
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