M&A Deal Volume Reaches 5 Year High in 2018

Ireland’s M&A environment remains strong following volatile 2018

The volume of M&A deals in Ireland reached a five-year high, despite a backdrop of increased geo-political instability and macro-economic issues.  This is according to the eighth edition of William Fry’s Annual M&A Review published today which found that Ireland boasts a healthy M&A environment despite ongoing global challenges. 

Key findings include:

  • Deal volume rose to 162 deals in 2018 up from 151
  • Deal value fell by 57% to €7bn in 2018
  • There were 65 ‘mid-market’ deals (value between €5m-€250m) with a disclosed value
  • Inbound activity –nine of the top 10 deals in 2018 had overseas buyers 
  • Outbound activity – 102 outbound M&A deals from Irish companies worth a total €6.1bn
  • Private equity transactions remained strong with 34 deals announced
  • Top sectors – Business Services 19%; TMT 16%; Pharma, Medical & Biotech 15%; and Financial Services 12%.

Shane O’Donnell, Partner and Head of Corporate/M&A at William Fry, noted, “Activity was strongest in the first three quarters of the year, with both the value and volume of M&A deals falling as 2018 drew to a close. This is consistent with global M&A patterns and reflects growing unease due to political and economic uncertainty."

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Mid-market deals dominate

The Irish mid-market, with deal value between €5m-€250m, continues to attract considerable attention from buyers across sectors.  In 2018 it accounted for 93% (65 deals) of the total number of deals where pricing was made publicly available. Of these, over half (37) were in the €15m-€100m bracket. Two noteworthy deals were the UK's Nomad Food's €226m acquisition of Green Isle Foods, the manufacturer and distributor of Goodfella's pizza and Groupe Circet S.A.'s €150m acquisition of KN Group.

Private Equity activity remains healthy

Although the value of PE activity in Ireland fell in 2018, the volume of deals has repeated the record performance of 2017. Rising volumes demonstrate growth in Ireland's PE scene, with further expansion to come as some of the newer funds raised over the last five years start to explore exit opportunities. The largest PE deal in Ireland for 2018 was the Cinven acquisition of AXA Life Europe, which was valued at under €1bn. Another large PE deal was Apollo's €500m acquisition of hotel management business Tifco.

International activity 

International buyers continue to see considerable strategic value in Ireland’s businesses. In fact 2018 saw the highest annual volume of inbound deals - 108 deals with a value of €6.3bn.  In addition, nine of the top 10 largest deals of 2018 were inbound transactions, with acquirers emanating from as far afield as Japan and China, as well as from markets that have long held strong ties with Ireland, such as the UK and the US.  Outbound activity was also very buoyant with 102 deals with a value of €6.1bn taking place during the year compared to 101 deals in 2017. Key inbound deals include the €495m acquisition of the Mater Private Group by France's InfraVia Capital Partners and the 30% stake acquisition in Avolon Holdings Limited by Japan's ORIX Aviation Systems Limited.  Key outbound deals during the year included Smurfit Kappa's €460 acquisition of paper and board recycling business Reparanco, based in the Netherlands and Kerry Group's acquisition of US-based Fleischmann's Vinegar Group for €350m.

Sector watch

Ireland's broad-based economy is reflected in the range of sectors that attracted M&A activity in 2018. Deals were fairly evenly split across a number of industries by volume.

Business services accounted for 30 deals, the highest volume of any sector, although the transactions were, on average, towards the lower end of the mid-market: total deal value across the sector was €62m. Corporate learning software company Learnosity, for example, received a "significant investment" from tech­ focused investor Battery Ventures in May 2018.

TMT was the second most active by volume, with 26 deals announced, or 16% of total numbers, attesting to Ireland's strong reputation for technology businesses and the need for companies across sectors to adapt to increasingly digital and automated operations. Media deals were among the largest examples of this trend, with radio group Global's acquisition of Exterion Media, which has significant operations in Ireland, being a key example.

The pharmaceuticals, medical and biotechnology (PMB) sector in Ireland also attracted a great deal of attention during 2018. The sector saw volumes increase from 9% of total deals in 2017 to 15% last year, with 24 announced transactions. As a proportion of deal values, the sector's profile increased markedly- from just 3% to 18% (or €1.26bn), although much of this rise is accounted for by one deal. The €586m acquisition of Adapt Pharma by US-based Emergent Biosolutions made up 46% of the sector's deal value.

The financial services sector was also extremely active with 19 deals, valued at €3.2bn, accounting for 45% of Ireland's total M&A value for the year. Two noteworthy deals within this sector included ORIX Aviation System's purchase of a 30% stake in airplane leasing firm Avalon for €1.9bn and PE firm Cinven's €925m acquisition of AXA Life Europe.

Ireland is as an attractive location for many businesses seeking to relocate operations post-Brexit, according to Shane O’Donnell who noted, “The rise of large financial services transactions over the last two years are in part a reflection of Ireland's strength in the aircraft leasing sub­sector, but it also demonstrates the attractiveness of Dublin as a base for businesses in the sector looking for alternatives to London. Dublin has positioned itself as a hub for previously UK-based firms that need to service EU clients and has attracted names such as Barclays and Merrill Lynch, which have both received authorisation to expand in Ireland. However, despite these highly positive signs, Brexit continues to pose challenges for financial services firms in Ireland.”

Outlook for 2019

Looking ahead, Shane O’Donnell concluded by saying, “As we move into 2019, the outlook for M&A activity in Ireland is more mixed than has been the case over recent years. The first few months of the year may be more subdued in terms of both value and volume than in 2017 and 2018. However, the fact that mid-market activity accounts for such a significant share of Irish M&A will mitigate against downward pressure that may be seen in some other markets where larger deals are more prevalent. Absent any major shock, overseas and domestic companies will continue to make acquisitions of businesses in this bracket as they seek to respond to challenges posed by an ever evolving economic and political landscape.”

 

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Key Contacts

Shane O'Donnell Partner

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