Industry & Business

The first six months of 2017 have proven to be a dynamic period for Ireland’s merger and acquisition (M&A) market and it is clear that Ireland continues to be an attractive destination for international investment. This is according to the mid-year William Fry Mergers & Acquisitions Review 2017, in association with Mergermarket, which was published this week.

Key findings include:

• There were 60 deals with a combined value of €8.2bn in H1 2017
• 18 private equity transactions worth €7.5bn represent the highest H1 figure on record
• Inbound activity at record high with 44 deals in H1
• 24 ‘mid-market’ deals were announced in H1 2017
• The consumer sector accounted for the largest increase in value from 8% in 2016 to 15% in 2017
• The financial services sector saw the bulk of deal value with €7.1bn spent across 9 deals

Shane O’Donnell, Head of Corporate/M&A at William Fry, noted, “Ireland continues to be one of the strongest performers in Europe in the foreign direct investment sector despite geopolitical uncertainty instigated by Brexit and the US Presidential election. The first half of the year has been very active with significant mid-market activity and we have seen record highs in private equity with very healthy M&A pipeline for the rest of the year.”

Ireland Open for Business

Irish companies continue to attract interest from global investors looking to enhance their European presence. The number of transactions climbed from 40 in H1 2016 to 44 in H1 2017 to reach the highest half year deal count on Mergermarket record (since 2001).

Private Equity

Private Equity activity has gathered momentum in the first half of the year, with 18 transactions worth €7.5bn representing the highest H1 figure on Mergermarket record.  Reflecting the importance of PE activity to the Irish M&A market, five of the top ten transactions in the first half of the year were PE related. These included the sale of AWAS to Dubai Aerospace Enterprise by Terra Firma Capital and the Canada Pension Plan Investment Board.

Mid-market activity

24 mid-market (deals valued under €250m) deals were announced in H1, accounting for 92% of all deals disclosed in H1, up from 82% in 2016. This increase in mid-market activity was driven by both domestic and international companies looking for strategic growth. In a clear sign of confidence in the Irish market, German insurance firm Allianz acquired a 33.5% stake in Allianz-Irish Life Holdings for €160m while Netherlands-based Fortuna Entertainment purchased sports betting software company Hattrick Sports Group for €85m. PE firms have also been active within the Irish mid-market, displayed by French investment firm InfraVia’s €70m acquisition of Dublin-based retirement and nursing home Carechoice.

Domestic market restructurings

Restructuring deals are increasingly coming into focus within Ireland’s domestic market as companies look to increase profitability and gain a competitive edge. Irish food conglomerate Glanbia’s shares hit a record high after it announced a €112m restructuring plan to spin off its dairy division in March. Restructuring plays such as this are likely to generate more deals during the second half of the year as companies look towards unlocking synergies in order to maximise opportunities.

Sectoral M&A Activity

As in past years, the tech, pharma and financial services sectors accounted for a large slice of deal activity in H1. However, it is the consumer sector that accounted for the largest increase in value year-on-year. This increase in consumer deals reflects a global trend – it was the largest valued sector worldwide in H1. In the highest valued deal in the sector, US consumer giant Church & Dwight acquired hair growth vitamin supplement producer Viviscal from Irish beauty products firm Lifes2good for €150m.

It was the financial services sector which saw the bulk of deal value during H1 with €7.1bn spent across seven deals. However, the majority of this figure was associated with one deal – Dubai Aerospace’s €6.9bn acquisition of Dublin-based AWAS Aviation Capital. While the AWAS deal skews the value percentage figure, it is worth noting that volume in financial services M&A also increased from 12% to 15% year-on-year.

In the Irish agri-food sector, M&A activity has proven to be active throughout H1. Despite the uncertainty for the Irish export market caused by Brexit, there is a growing level of confidence among Irish players within the sector and the continuing push for scale will drive activity in the short term. Carton Brothers recently sold Manor Farm to Scandi Standra in a deal valued at €69m, and JBS have announced their intention to sell Moy Park.

Technology remains the stalwart of Irish M&A activity, with access to Irish companies’ technological capabilities and the country’s skilled workforce continuing to drive deals.  A developed tech and VC market has supported this growth. Openness from potential investors in relation to innovation has led to an active M&A market, with the TMT sector accounting for 15% of total deal count targeting Irish firms.

Outlook for H2 2017

Looking ahead, Shane O’Donnell noted, “The ongoing period of uncertainty between the EU and UK poses the greatest risk to dealmaking in 2017 and beyond. Volatility will inevitably cause some dealmakers to put transactions on hold until a clearer picture emerges. In response to this changing deal climate, it is essential that Ireland focuses on further enhancing its competitiveness to ensure it can capitalise on investment at both a domestic and international level. That said, Ireland’s stable currency, strong growth trajectory and status as a member of the European Union (EU) stand it in good stead.”