Bumper year for mergers and acquisitions despite pandemic

Katharine Byrne, Partner and Head of BDO Corporate Finance, contributed to Business Ireland Magazine, published by The Irish Times to discuss the current trends in mergers and acquisitions (M&A).

It has been a very good year for mergers and acquisitions, with deal volumes hitting record highs. While mega-deals make the headlines, much of the M&A frenzy of the past 12 months has taken place at mid-market level.

There have been challenges. “M&A, especially at mid-market level, is all about building confidence, trust and relationships. It’s hard to build that in a remote setting,” says Katharine.

“On the other hand, the upside of the remote environment is that we’ve a lot more international buyers in the market now and no longer need the nitty gritty of trying to co-ordinate flights. Now we can all just hop on a call.”

The fact that private equity funds operate to strict timelines is also contributing to the currently high transaction rates. Many have been exiting and going back for more.

The amount of private equity in the market has also simply grown. There is now three times as much of it globally than there was a decade ago.

“It’s unprecedented. There is currently $3 trillion in private equity funds globally looking for a home,” she notes.

It typically divides into early-stage venture capital, growth capital, and late-stage funding, which tends to be more international.

“In Ireland, we are now seeing late-stage PE (private equity) funding coming into the market much more aggressively than previously, including from the US and Canada which previously would have considered Ireland too small. Now they see that, especially with technology, they can take these companies to a much larger platform globally,” she says.

Technology and financial services, particularly insurance, are extremely active. PE likes sectors which are not exposed to economic cycles too, she points out, such as education and health, particularly where a company has an edtech or healthtech innovation.

Valuations are high and, for an SME, PE can be a cleaner route than selling to a trade competitor, which brings competitive risks. “Also, trade buyers look for synergies. If an owner is protective of their management team they may not want to expose them to the risk of redundancies,” she concludes.

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Content adapted from Business Ireland Magazine, published by The Irish Times.

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