Wall of capital drives M&A appetite but deals are taking longer

Katharine Byrne, Head of the BDO Corporate Finance team recently featured in The Irish Times to discuss this year’s deal activityRead Katharine's extract below. 


This year’s deal activity is taking place against a backdrop of stubborn inflation and rising interest rates. However, despite the headwinds the mood is upbeat.

“While overall the headlines state that 2022 M&A levels were lower than the record-breaking levels of 2021, the actual volume of transactions in Ireland remained at similar levels but with a reduction in the number of larger-value mega-deals,” says Katharine Byrne, partner in corporate finance at BDO.

Appetite for M&A remains strong but buyers are more cautious and as a result transactions are taking longer.

“The key for companies looking to sell is to be well prepared for the process and to ensure that they have clear understanding of the potential purchaser’s own timing and strategy,” says Byrne. “There is definitely a lowering of valuation expectations, especially in sectors which were attracting much higher multiples in prior years, but this a simply a return to more sustainable levels, with increased focus on cashflows and maintainable earnings.”

As interest rates rise the structuring of deals is also changing, with lower leverage and greater need for equity, as well as increased use of deferred consideration and earn-outs.

“With significant levels of ‘dry powder’ to deploy, private equity (PE) is now representing an increased proportion of M&A, especially in mid-market transactions as the PE deal structures are more flexible and can enable vendors to crystallise their shareholder value while also maintaining a share in the upside potential of the business,” says Byrne.


Content adapted from The Irish Times.