The Irish merger and acquisition (M&A) market is showing signs of sustained recovery from the lows that followed the financial crisis, according to Bryan Bourke, head of Corporate& M&A at William Fry, in the third edition of William Fry’s Annual M&A Report which was published today.
Deal activity has continued to increase, albeit marginally, year on year with 82 deals in 2013 up from 80 in 2012. Although deal value declined in 2013 to €18.9bn (down from €25.7bn in 2012), this value level is still significantly higher than the low levels seen in 2009.
The increased volume was driven by a number of factors including; an increase in large scale deal making, Ireland’s attractive corporate tax environment and the strong presence of foreign acquirers. Indeed, the largest deals of 2013 have been driven by corporate acquirers using Ireland as a platform for international expansion, a welcome departure from some of the post crisis inspired M&A of recent years.
Key findings in the report include:
- 3% increase in deal volume and 26% decrease in value
- Inbound deals accounted for 99% of aggregate M&A value and 73% of volume
- 73% of M&A deal value concentrated in the pharma/medical/biotech sector driven to a large degree by a few very big deals
- Key sectors by deal volume: TMT (20%), financial services (16%)
- Largest deals partially driven by Ireland’s competitive tax environment
- String of inverse takeovers – US companies relocating to Ireland as part of expansion
Strong presence of foreign acquirers
One defining feature of M&A activity for 2013 is the strong presence of foreign acquirers and the availability of high quality assets. While it may be the case that some of Ireland’s largest M&A deals have been supported by Ireland’s tax efficient regime, it is also true to say that these deals involved specialised targets identified as strategic acquisitions. For example, the acquisition of Warner Chilcott by Actavis will give the combined entity reportedly circa €3bn in annual revenues solely from the target’s core therapeutic categories.
Financial services M&A has also been driven by interest from foreign acquirers. Activity in the sector fell by 81% in value to €1.9bn (down from €11.3bn in 2012), though the activity that took place consisted of strategic transactions involving market-leading international acquirers seeking and established footprint in Ireland.
Sectoral M&A activity
In 2013, the bulk of M&A value (73%) was concentrated in the pharma/medical/biotech sector, though this was driven to a large degree by the Warner Chilcott and Elan deals. The financial services sector accounted for 10% of aggregate deal value (down from a much more substantial 44% in 2012), with the energy and TMT (technology, media and telecommunications) sectors accounting for 7% and 6% respectively. In contrast to value, M&A volume was more evenly spread across the sectors, TMT at 20% and financial services at 15% were the busiest sectors for the fourth consecutive year with business services (13%), leisure (13%), and industrials and chemicals (11%) each accounting for roughly one tenth of total volume.
Technology sector tipped for a strong 2014
The TMT sector has been one of the strongest sectors in Ireland for the past five years. TMT activity has accounted for approximately one-fifth of total deal volume in Ireland every year since 2008, and from 2012 to 2013 the sector’s share of total deal volume increased from 16% to 20%. 2013 saw 16 TMT deals (up from 13 in 2012) worth a combined €1.2bn.
In value terms, some of the largest M&A deals of 2013 in this sector have involved traditional telecom companies, the €850m acquisition of Telefonica Ireland Limited was the sectors largest deal. Also of note was the Irish Infrastructure Fund’s €120m acquisition of radio operator and broadcaster TowerCom.
Based on the ‘company for sale’ stories tracked over the past 12 months, the highest potential number of M&A deals are anticipated in the TMT sector followed closely by the pharma/medical/biotech sector.
Bryan Bourke, partner and head of Corporate and M&A at William Fry says that 2013’s figures build on a solid performance in 2012. “The Irish M&A market continues to show signs of sustained recovery. While deal value in 2013 dropped considerably (by 26% on 2012 activity), the market remains in a stable and healthy condition having moved on very significantly from the lows seen in 2009.
“There are ongoing challenges but there have been a number of positive developments. In addition to a the very significant amount of foreign investment we have seen in the Irish Real Estate market and sustained activity in M&A, in late 2013 Moody’s upgraded Ireland’s rating to investment grade for the first time since 2011. This upgrade should facilitate further investment from overseas. The M&A market in Ireland is showing signs of recovery across a variety of sectors, particularly TMT and pharma/medical/biotech and we expect this to continue in 2014.”