Record deal volumes unlikely to be matched in 2019 given Brexit, potential rising US interest rates, geopolitical and macro-uncertainty generally
Investec Corporate Finance has released its 14th annual M&A Tracker Survey which reviews trade sales, buyouts and acquisitions in the Irish market where the target company or acquirer has a significant presence in Ireland. The annual survey found that 2018 saw the highest level of deal volume in one year since Investec first started its annual review in 2005. Overall 2018 saw 268 deals recorded, an increase of 5% from 2017 with total transaction values topping €10 billion.
Financial services sector leading they way in M&A deals
Of the 12 sectors reviewed, the Financial Services sector recorded the highest level of deal value driven by the €2.4 billion transaction involving Goshawk Aviation and Sky Aviation Leasing. In total, the sector accounted for 27.7% of the total deal value.
The Food and Food Services sector also performed strongly and was responsible for 4 of the top 10 deals that accounted for almost a quarter (24.6%) of total deal value in 2018. This was due to the large acquisitions carried out by Kerry Group and Glanbia as well as Greencore’s disposal of its North American division. Transactions from both the Financial Services and Food/Food Services sectors account for over half of total deal value in 2018 with Health and Pharmaceuticals following behind with c. 10%.
Q1 started strong with Q3 even stronger
2018 got off to a strong start with Q1 experiencing a rise in deal value to €1.3bn, attributed to significant deals including the acquisition of Blueface by Star2Star Communications in January for a reported value of €404m. However, the volume of deals was down 9.4% on the 68 deals delivered in Q1 2017. Momentum maintained in Q2 with a combined deal value of €1.3bn matching the performance of Q1.
In line with previous years, Q3 continues to be the standout quarter for M&A activity in Ireland, representing over 50% of disclosed deal value for the year in excess of €5.1bn. This quarter included the acquisition of Irish medical company Adapt Pharma by Emergent BioSolutions for a reported €585m as well as the acquisition of the 24-property hotel portfolio of Tifco Hotel Group by Apollo Global Management for an estimated €500-600m.
A total of 80 deals were recorded in Q4 with an aggregate deal value of €2.3bn. This exceeded the previous high-water mark of 77 transactions in a quarter achieved in Q4 2006, an indication of the strength in the market. Once again Food and Food Services transactions dominated this final quarter as Irish players acquired significant overseas assets amounting to a disclosed value of c. €1.9bn.
The top 10 deals accounted for c. €6.5bn, or 65% of total disclosed deal value for the year.
Looking to 2019, Investec does not expect this year to reach the same high levels of deal volume reached in 2018 for several reasons including:
- Continued Brexit uncertainty which is now fully upon us as we move through Q1’19;
- Greater volatility in equity markets as evidenced by stock market volatility in the final months of 2018 through to January 2019, although the forthcoming earnings reporting season should help bring clarity directionally to equity markets;
- Potential rising interest rates in the US; and
- Continued geo-political uncertainty between certain jurisdictions and in certain regions globally as well as continued macro-uncertainty in general.