Ireland’s merger and acquisition (M&A) market in 2016 was steady in comparison with the more buoyant 2015 according to the sixth edition of William Fry’s Annual M&A Report published today. However, there was a marked difference between the first half of 2016 and the second six months of the year.

M&A deal volume increased 3% from 125 deals in 2015 to 129 deals in 2016. M&A deal value also increased by 65% to €26.8bn – however, this was largely down to US industrial Johnson Controls’ €14.9bn purchase of fire and security provider Tyco. Excluding this deal, value contracted 27% to €11.8bn compared with the same period last year. However, a closer comparison of annual figures reveals a pattern of ‘normalisation’, especially when comparing the first half of the year with the second. 

Shane O’Donnell, Partner and Head of Corporate/M&A at William Fry, says that Ireland’s 2016 M&A figures should not be a cause of concern when compared to the buoyant post-crisis years, “The Irish M&A landscape in 2016, in overall terms, has remained steady in comparison with 2015. However, while the first half of the year continued the trends from 2015 with robust deal levels, the second half of the year showed a softening in this performance. Macroeconomic and political uncertainty have led to businesses behaving with more caution than usual. As a consequence, dealmakers have paused to take stock before embarking upon new transactions."

This domestic decline in activity mirrors global M&A trends – volume and value have fallen 4% and 18% respectively year-on-year. 2016 contained several unpredictable political and economic developments, most significantly the UK’s decision to leave the EU and Donald Trump’s US presidential victory. These upheavals, coupled with tighter regulatory controls on M&A, caused dealmakers to back away from the negotiating table until the economic picture becomes clearer. 

However, this ‘new normal’ for Irish M&A has seen a number of bright spots. There has been continued strong activity across a range of sectors, including the industrials and chemicals, energy, mining and utilities (EMU); pharmaceutical, medical and biotech (PMB); and Telecommunications, Media & Technology (TMT) sectors. Ireland continues to attract attention from Private Equity, indicating faith in the country’s growth prospects. Domestic and international buyers are both driving activity, pointing to a holistic and dynamic M&A market.

Key findings in the M&A Review 2016 include: 

  • M&A deal volume in 2016 was up 3% from 125 to 129 deals
  • However, deal volume dropped by 21% between H1 to H2 from 72 deals to only 57 deals.
  • Outbound deals accounted for 40% of total Irish M&A, higher than several European peers including France, the UK and Germany
  • Private Equity deal value was down by 51% from €8.6bn to €4.2bn
  • Key sectors by deal volume: TMT (16%), Business Services (13%), Financial Services (12%) and Industrial and Chemicals (12%) 

Diverse Sectoral M&A Activity 

In 2015, PMB and TMT were Ireland’s strongest performing sectors. In 2016, they were joined by industrials and chemicals, which has seen a near three fold jump in activity–volume rose from five deals in 2015 to 14 in 2016. PMB continued to perform well in spite of tighter legislation on so-called tax inversion deals. Deal volume remained steady at 11 deals, compared with 14 in 2015. Value jumped 59% to €1.3bn.

TMT remains a critically important sector to Irish M&A, but 2016 saw year-on-year volume and value fall by 46% and 48% respectively. However, there were enough significant deals in the industry in 2016 to indicate the underlying and enduring health of the TMT sector. Energy, mining and utilities also had a strong year. Volume rose from only five deals in 2015 to ten deals in 2016, while deal value also edged up 16% to €282m.

Increase of Inbound M&A Deals 

Signficantly, Ireland had a higher percentage of inbound M&A in 2016 than both the UK and France. In terms of absolute numbers, value from inbound deals is higher than each of the last five years excluding the boom year of 2014. Compared with 2015, inbound deal volume remained steady at 79 deals, while value rose 69% to €26.2bn in 2016. This is further proof that foreign buyers view Ireland as an attractive investment destination, and points to the international character of the Irish M&A market. Inbound buyers came from a healthy mix of geographies. Among the top ten inbound deals of the year, five buyers were from North America, three from Europe and two from Asia-Pacific. These large cross-border deals were concentrated in Ireland’s mainstay sectors: PMB, TMT, and industrials and chemicals.

Private Equity Levels Remain Solid

Global private equity (PE) activity remained steady in 2016, with volume increasing by 3% while value fell by 0.4%. The continued level of interest in Irish deals by PE companies reflects the ongoing belief in the underlying value and growth potential of targets. In Ireland, buyouts and exits in 2016 numbered 23 – a one deal increase on 2015. However, value fell more sharply, dropping 51% to €4.2bn. US giant Carlyle Group was responsible for the two largest buyouts while there was also solid exit activity. The top two exits saw Permira sell Creganna-Tactx Medical to Swiss-based TE Connectivity, and Blum Capital exit its holding of Xtralis to HoneywellInternational.

Outlook for 2017

Looking ahead to 2017, Shane O’Donnell noted, “Ireland’s economy is forecast to grow, while key domestic metrics such as unemployment rates and public investment are also predicted to improve. However, global developments in the UK, Europe, and the US could have a dampening effect on the market. Nonetheless, we are confident that Ireland’s improving economic fundamentals, sector strongholds, and continued reputation as an attractive international business destination will ensure that 2017 sees healthy levels of M&A”.