The first half of 2018 has seen a very steady level of M&A activity in Ireland with a more robust performance here than in the UK, according to Katharine Byrne, a partner in Corporate Finance at BDO, a leading chartered accountancy firm in Dublin.
Transactions for the first five months of the year have been strong as confidence creeps back into the market with 66 mergers completed to the end of May with a total value of €2bn.
“In 2017 we recorded a total of 160 deals for the year which was up from 143 in 2016,” said Byrne. “What was unusual in 2017 is we had an extremely busy second quarter. This was partially attributable to an overhang from the first quarter with people still adjusting to President Trump and other political changes. So when comparing 2018 year to date activity to prior year we’re slightly down, but I wouldn’t be concerned because the level of activity on the ground is still very strong.”
BDO specialises in providing trusted advice to growing and ambitious Irish businesses and companies. Byrne said the firm has seen a transition between Irish companies that previously would have grown to a certain level and then sold out to other Irish companies who are far more ambitious and are looking to scale up on an international stage. That endeavour is underpinned by the fact that they are getting greater access to funding, which is where BDO come into the equation with tax and advisory services as well as expertise on funding, M&As, transaction and risk advisory services.
“A lot of it is about educating clients who know there is funding available, but we advise them on the best source of funding, where to find it and how to unlock it,” said Byrne. “We make sure it’s a sustainable level of funding that is going to help them grow their business.”
Indeed, part of Ireland’s continued growth in investment owes a great deal to the change in attitude by existing businesses. In educating themselves of the changing ways of the marketplace and corporate transactions, they have progressed from a traditional notion of buying and selling 100% to understanding more complex deals involving Private Equity funds.
“Confidence, obviously is still the main factor behind that activity where you have Irish companies exceeding their growth expectations and there is a lot more funding options” said Byrne. “We’re now seeing the successful exits by some of the local private equity funds from investments made in the last five years and this has helped Irish companies understand the benefits of private equity. We’re in a maturing funding market, that’s the best way to put it, because 10 years ago we were solely dependent on debt and when equity came on the scene five years ago it was viewed with scepticism because people didn’t understand what private equity was bringing to the table. Now that they understand how it works, it’s triggering a lot more activity on investments.”
Byrne said with the increase of funding both trade and equity buyers are chasing opportunities and pushing up valuations in certain sectors. However, neither party are taking undue risks.
“The focus now is on sustainable growth and at the same time making sure that the acquisitions are of strategic value,” said Byrne. “For example, we’re finding an increasing number of businesses are using M&A to acquire specific technologies in an effort to maintain growth in rapidly changing markets. It’s a combination of international investors identifying Irish tech companies who are potential disruptors as well as the traditional buyers who are buying up technologies as a way of disrupting from within. But they are not investing for the sake of investing, they are still being cautious with due diligence extremely important.”