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Taxand Ireland's 2013 review of the Irish M&A market
Taxand Ireland recently launched it’s the third M&A Annual Review, published in association with Mergermarket. In this report, Taxand Ireland provides a comprehensive overview of developments in the Irish M&A market during 2013, and offers insight on likely trends in the year ahead.
The Irish M&A market continues to show signs of recovery from the worst days of the financial crisis. 2013 was a year that saw consolidation of the recovery over recent years in the M&A market. Deal volume edged up 3% year-on-year (YoY) to 82 deals, although value dropped 26% to €18.9bn over the same period. Significantly, deal volume in the >€500m range doubled, thanks to a flurry of inbound strategic acquisitions in 2013. Equally, whereas previous years have been characterised by crisis-inspired M&A, the largest deals of 2013 were driven by corporate acquirers using Ireland as a platform for strategic and international expansion. This activity was most pronounced in the pharma/ medical/biotech, telecomms/media/technology (TMT) and financial services sectors, all of which saw an influx of foreign buyers targeting Irish firms for their technological capabilities, growth potential and/or lucrative client bases.
However, the strategic M&A activity did not extend to the private equity arena. Private equity has been active in other sectors in Ireland, but not in the M&A sphere where it has been stagnant since 2010. In 2013, buyout value dipped to €251m, the lowest point since 2008. Meanwhile, exit activity remained languid, with four deals in 2013 compared to 2012’s five. There are some signs of life in the TMT sector, where private equity and venture-backed targets saw some trade sale activity throughout the year, but on the whole the buyout world seems to be suffering from the lack of certainty and confidence that has suppressed deal volumes since 2009.
This may change in 2014 as regulators assess how Ireland has fared through the financial crisis that started more than five years ago. In 2014, the European Central Bank (ECB) will evaluate Irish banks’ balance sheets to determine whether they have sufficient capital to offset the risk on their books. An independent team of evaluators, appointed by the International Monetary Fund (IMF), will measure the impact of Ireland’s EU-IMF bail-out programme, which ended in late 2013. Uncertainty notwithstanding, there is ample room for cautious optimism. In late 2013, international ratings agency Moody’s upgraded Ireland’s credit rating from sub-investment grade to investment grade for the first time since 2011, paving the way for international investors – many of whom are restricted from investing in sub-investment grade debt – to purchase Irish bonds. The ongoing levels of international interest in other Irish asset classes, especially properties and loan books, shows that Ireland is on the international radar.
Also published in Thomson Reuters' Taxnet Pro, 4 April 2014
Overall, the M&A market in 2013 – much like the broader economy – has demonstrated a measure of resilience and recovery from the financial crisis. Investors with the appetite for growth, and the means to pursue it, have consistently turned to Ireland for the high quality assets and growth opportunities that the country has to offer, and should continue to do so well into 2014.