Predictions and trends in mergers and acquisitions for 2021

Katharine Byrne, Partner, BDO Corporate Finance, featured in The Irish Times special report on Mergers and Acquisitions. Read Katharine's extract below. 

According to Katharine Byrne, Partner, BDO Corporate Finance, Ireland still attractive for international investors.

Nearly a year on from the first Covid lockdown and M&A activity remains remarkably resilient, according to BDO corporate finance partner Katharine Byrne. “After the initial stop to transactions in Q2, the rebound in M&A activity was much better than expected in Q4 of 2020 and this looks set to continue into 2021,” she says.

Many deals that had stalled last year are now closing or back on track, although the practicalities of working through due diligence and integration plans during the lockdowns has made the transaction process longer, with more innovative approaches required.

“Despite these challenges, we are seeing increased activity in ‘hot’ sectors such as technology, healthcare and life sciences as well as businesses such as food retail that have boomed over the last 11 months,” she adds. “Overall valuations remain high despite market uncertainties, but we are seeing shift in deal structures with increased focus on earnouts and share transactions in order to mitigate some of the risk.”

However, things can change quickly. “It’s generally acknowledged that confidence underpins M&A activity. We need confidence in political stability, in the vaccine rollout and the capital markets. A sudden change in these can quickly undermine confidence and disrupt M&A transactions, so it’s really important for buyers and sellers to recognise this at the outset and be ready to react very quickly.”

Byrne foresees a number of key trends for M&A in the coming year. The first is the role of private equity as a driving force behind deals with an increased focus on take privates and corporate divestments. “Across SMEs, succession planning is to the fore, with MBOs and consolidation across sectors being underpinned by private equity funds.

“The second half of the year will see an increase in the sale of distressed assets and opportunistic takeovers as businesses run out of road when Government supports cease and funders call in their loans. Ongoing digital transition, which was accelerated by Covid-19, will continue to drive a lot of activity across all sectors and size of companies, as businesses rethink their strategies and look to acquire new technologies.”

Environmental, social and governance factors will move in from the sidelines to become a pillar of the M&A strategies of large corporates and global equity providers. “This will quickly filter into the M&A plans of Irish companies as funders will seek out ESG investment opportunities.”

And finally, Brexit. “Ireland remains an attractive region for international investors and the fallout from Brexit is still driving activity as corporates look to secure their supply chains and access to the EU,” Byrne points out.

Content adapted from The Irish Times special report, Predictions and trends in mergers and acquisitions for 2021

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