M&A activity strongest since 2008

Business | Tue 9 Sep | Author – Business & Finance

Ireland’s M&A market is looking healthy and active with a range of factors, macro and micro, indicating a bright future for the sector according to the William Fry Mid-Year M&A Review 2014 launched today.

The first six months of 2014 have shown a significant increase in the volume of activity in Ireland’s M&A market compared with 2013 levels for the same period. The first half of this year saw 42 deals announced representing a 31.3% increase on H1 2013 and the second highest H1 results since 2008. Indeed both Q1 & Q2 2014 saw higher or equal deal numbers on their 2013 counterparts.

Deal values witnessed an even more dramatic increase in H1 2014 with deals totaling €39.3bn announced.  This increase was driven largely by the acquisition of healthcare company Covidien by US-based medical device manufacturer, Medtronic for €33.9bn.

Inversion deals

The Medtronic acquisition of Covidien represents another example of the high-profile ‘inversion deals’ that have dominated Irish inbound M&A over the last year, particularly in the medical and pharmaceutical sectors. This follows the trend in 2013 with Perrigo Company’s €4.9bn purchase of Elan Corporation and Actavis’ €6.5bn deal for pharmaceutical giant Warner-Chilcott. While controversial in the US political sphere, inversions afford overseas acquirers the right to re-register in Ireland and optimise their arrangements in a transparent environment while also giving such acquirers a foothold in Europe.

Growth in domestic activity

High-value deals are still dominated by foreign players entering Ireland with nine of the top 10 deals involving overseas corporates buying/merging into the country. Notwithstanding the high levels of activity from foreign parties, it is encouraging to see a greater proportion of domestic M&A taking place. In H1 2014 nearly one-third (31%) of all deals were domestic, compared with 27% in the whole of 2013. Domestically, the consumer food space has seen a significant amount of activity for 2014 with deals such as the management buyout of Freshways from Kerry Foods and WHW Bakeries acquisition of Irish Pride Bakeries.

Capital markets

Irish companies are finding that the capital markets are becoming more receptive to listings. Irish gaming company King Digital Entertainment, the company behind the successful mobile game app ‘Candy Crush Saga’, had a $500m listing in March. Green REIT, the first Irish REIT, raised a further €400m this year. Further listing activity included Shannon-based engineering company Mincon Group dual-listing in the Irish and London stock exchanges, raising €50m. These successes have lead to an expectation of greater capital markets activity in the near future.

Bryan Bourke, head of Corporate and M&A at William Fry says that while the figures for M&A activity for the first half of 2014 are encouraging, there may be a few speed bumps ahead. “Despite the broadly positive climate for M&A, Ireland faces a number of challenges that could put a damper on deal making. The levels of public and private debt, for instance, remain troubling. Despite this, there are also many positive indicators pointing to bright future and I would advise cautious optimism for Ireland’s M&A marketplace. Ireland is still attracting foreign investors. In addition, the first half of 2014 saw the second-highest number of deals for a H1 since 2008. Most importantly, domestic M&A activity is also rising with nearly one-half of all transactions being home-grown purchases. We expect that M&A deal activity, will continue at a steady, and possibly improved, rate over the coming months.”