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PE deal volume drops in 2019 as sentiment weakens

16 Aug 2019 / business Print

PE deal volume drops in 2019 as sentiment weakens

The first six months of 2019 show strong activity for Ireland's merger and acquisition (M&A) market. Deal value is up 24% compared to the same period last year but deal volume dropped on the back of weaker sentiment due to global economic uncertainty and Brexit unease. 

However, Ireland continues to be an attractive destination for international investment according to the mid-year William Fry Mergers & Acquisitions Review 2019, which has just been published.

Key findings include:

  • There were 75 deals in H1 2019, down from 93 deals announced in H1 2018,
  • Deal value increased to €2.5bn,
  • 21 private equity (PE) transactions worth €1.8bn, a 74% rise compared to H1 2018,
  • Inbound M&A value in H1 2019 totaled €2.2bn,
  • Technology, media and telecom (TMT) accounted for 55% of disclosed deal value (€1.4bn) and 22% of deal volume (17 deals),
  • Financial services recorded 11 deals, representing 15% of all announced deals.

Shane O’Donnell, (pictured) corporate and M&A partner at William Fry, said: “Brexit; concerns that the global economy is reaching the peak of the cycle; and escalating trade tensions between the US and China have all contributed to dealmakers’ reason for pause.

“The impact of this geopolitical uncertainty was observed in Q4 2018, and with dealmakers no clearer on how these matters will conclude, the slowdown has carried over to Q1 2019 but we have seen a marked improvement in Q2.

Deal focus

2019 has seen a more active Public M&A market in Ireland.

In June, US-based pharma group Abbvie announced its agreement to acquire to Ireland’s Allergan in a US$86 billion (€77.4 billion) blockbuster deal, while Belgian headquartered publishing company Mediahuis took over Ireland’s largest newspaper group Independent News & Media (INM) private in a deal valuing the company at €145.6m. 

Also noteworthy was UK-based private equity firm Epiris’s delisting of IFG Group in a €208m deal, while Green REIT recently announced its decision to sell to Henderson Park.

Private Equity

PE activity in Ireland totaled €1.8bn over the first six months of the year, a 74% rise compared to H1 2018. 

Although PE deal value is still well below recent years, PE firms are responsible for around three quarters of the overall deal value in Ireland in H1 2019. 

PE deal volume, meanwhile, has risen slightly from 19 to 21 deals, compared to H1 2018, even though overall deal volume in Ireland over the period dropped by 19%. 

International private equity firms were active buyers, closing four of the top five deals of the year, including the sale of aviation services firm ASL to UK house Star Capital for €208m.

Inbound activity

Ireland continues to draw M&A interest from international buyers: inbound M&A value in H1 2019 totaled €2.2bn, a 28% increase on H1 2018.  Volume dipped from 65 to 53 deals, in-line with overall M&A figures. 

Overseas investors led the five largest deals in Ireland over H1 2019 too.  Despite the ongoing uncertainty and fears over Brexit, Ireland has attracted the largest number of relocations as a result of Brexit, with 100 firms moving jobs to the Irish capital.

Sectoral M&A Activity

Over the last five years the TMT, pharma and financial services sectors have consistently accounted for a significant proportion of the M&A activity in Ireland. 

In H1 2019 these industries have led in the M&A activity rankings once again.  TMT was by far the dominant sector, accounting for 55% of disclosed deal value (€1.4bn) and 22% of deal volume (17 deals).

Technology has been a steady source of deal flow in Ireland, with investors drawn to the country’s position as the world’s second largest exporter of computer software and information and communications technology.

Deal volume

Financial services came in second in terms of deal volume, with 11 deals, representing 15% of all announced deals.

Notable deals include Allied Irish Bank and First Data’s acquisition of Payzone and Brewin Dolphin’s acquisition of Investec Capital & Management from its parent for €44m. 

In terms of value the industrial and chemicals sector ranked second, although there were only two deals with disclosed values.

One of the biggest was the €300m acquisition of the shutters and awnings business of CRH by PAI Partners-backed Stella Group. 

Shane O’Donnell said “The Irish economy is one of the fastest growing in Europe - the ease of transacting and its low corporate tax rate make the country an attractive option for overseas buyers and private equity firms, who have been the main drivers of deal flow over the last six months.

Robust

“Opportunities in the fast-growing but robust sectors of technology, financial services and life sciences, meanwhile, will also continue to draw local and international interests as corporates continue to deploy capital in these “hot” industries. 

“The easing of trade tensions and Brexit reaching a stable outcome could bring significant improvements.  Further, Ireland's solid fundamentals suggest that it will continue to deliver plenty of M&A opportunities for buyers who want to invest in H2 2019.”

 

Gazette Desk
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