Future moves by small publicly-quoted Irish companies to return to private ownership could provide significant deal flow for venture capital firms operating in Ireland, a leading European venture capitalist has said.

Many small and mid-cap Irish public companies have seen their share prices fall in the past year as funds have flowed into European stocks following the advent of the euro.

"That has taken the shine off the smaller and mid-cap Irish companies and we have seen their share prices reduce," said Mr Mark Brunault, director of PRICOA Capital Group which has offices in London, Frankfurt and Paris.

"There's no liquidity and if you try to buy shares, you move the price. For companies like that, they have all the burden of public ownership, they have to report to analysts and they have strategic issues in that they can't raise capital because their share price is too low. Those are the kinds of candidates where going private makes sense."

Mr Brunault said he expects many of these Irish companies to consider going private in the future.

"It has created opportunities to do public-to-private deals. Two of the largest deals in recent years have been exactly that. Clondalkin is one and Adare is another one and I would expect to see a lot more of that activity," he said.

The Government's National Development Plan may also provide opportunities to invest in construction and civil engineering companies - a sector normally avoided by venture capitalists, he said.

"Construction and civil engineering have typically been areas where people like us shy away from," said Mr Brunault. "But when you have that level of support underpinning an area of the economy, it may change the way we would look at that. We need to think about that, we need to be on our toes because this is a real opportunity."

Despite the downturn in the technology market, Mr Brunault said PRICOA was still eyeing opportunities among technology and IT companies in Ireland as well as abroad.

"This could be the beginning of a period where a savvy buyer with capital and not a lot of problems could invest very selectively and very profitably in technology," he said.

"Time has passed and we've been able to watch companies perform and we've been able to analyse the quality and value of their business."

UK-based PRICOA has made two investments in Ireland to date. It backed the £3.2 million sterling acquisition of sportswear and leisure retailer Lifestyle Sports from Tesco Ireland in March 1998 and it invested £5.8 million sterling in the deal worth £13 million sterling to acquire Waterford Stanley, the cast iron stove and cooker manufacturer.

Of the Lifestyle deal, Mr Brunault said PRICOA would not have closed a similar deal in the UK. "One of the drivers for us and for ACT Venture Capital, who led that deal, was a real feeling that the demographics in Ireland were right for this business," he said.

At Waterford Stanley, PRICOA was working with the new management to turn the company, traditionally a manufacturing driven enterprise, into a market-led organisation, more responsive in anticipating consumer taste, Mr Brunault said.

The company is currently designing new products to suit the urban market, while retaining its traditional lines. It is also looking at setting up standalone centres and establishing partnerships with brand name retailers to distribute and sell its products.

While he sits on the board of Lifestyle, Mr Brunault said his company does not take a day-today role in the management of client companies. "We are very involved in trying to help management, to be a sounding board for strategic plans and to provide advice on specific problems and issues that come up," he said.

A typical PRICOA investment lasts between three and five years, according to Mr Brunault, which would suggest that its investment in Lifestyle is reaching a certain level of maturity. "We have certainly accomplished a lot but there are still opportunities to grow the business, opening new outlets and experimenting with presentation," he said.

Mr Brunault said PRICOA expects to complete another deal in Ireland in the next three to four months but declined to provide details.