Irish M&A market stays resilient against backdrop of global downturn

Katharine Byrne, Head of the BDO Corporate Finance team and a member of the BDO International M&A Group recently featured in The Irish Times Special Report on Mergers & Acquisitions.
In terms of activity, one of the biggest trend affecting activity this year has been the growth of “decarbonisation”. Solar panel or energy efficiency businesses – “anything that is helping companies to reduce their carbon footprint” – are of increasing interest to buyers, says Katharine Byrne, head of BDO’s corporate finance team and a member of BDO’s international M&A group.

Deal flow took longer this year as due diligence became more comprehensive. The rise of ESG (environmental, social and governance) reporting, not yet mandatory for SMEs, is already affecting the time it takes to get a deal over the line.

“SMEs don’t have ESG reporting requirements yet. But they will do, so they need to start gathering data now to support them,” says Byrne. 

Values held up only if a seller came well prepared, while sell-side auctions, previously a feature of the market, became something buyers were increasingly reluctant to get into, she says.

While there will always be a competitive element for a premium asset, this year buyers became increasingly resistant to being pressurised into short time frames – understandably, given all the additional due diligence now required.

Both local and international family offices were active, while trade buyers were in evidence too. As well as anything in the renewables space, there was particular interest in services into data centres, construction and facilities management. Businesses selling into the pharma, energy, tech and medtech sectors, including precision engineering, were also in demand. By contrast, consumer-facing businesses struggled.

“Anything that is old-school retail has struggled, unless they have successfully managed to develop online, because of the threat hanging over consumer spending,” says Byrne.

Deal structures changed too, with more reliance on earn-outs, part sales and deferred considerations. More than ever, vendors needed to bear in mind Revenue rules around deferred payments, with capital gains tax payable on the full amount up front.

“That’s very hard for vendors to swallow, so good careful tax planning was key,” adds Byrne.