Although M&A activity was down from an Irish and global perspective in 2023, as a small player in the global market, Ireland continued to outperform from a global perspective in terms of its high proportion of high-value deals. Deals such as AIG’s sale of Laya Healthcare, Softbank’s acquisition of Cubic Telecom and UKG’s acquisition of Immedis, all of which were material transactions not just in an Irish context but also a European one, indicates that there is still very strong interest in Irish targets from international buyers. The main drivers for transactions such as these continued to be buyer-lead focus on certain attractive sectors such as internet of things in the case of Cubic Telecom or buyers looking for entry points into new markets in the case of the AIG and Immedis transactions.
Richard Grey, partner M&A, A&L Goodbody, says: “We are expecting that M&A levels in 2024 will exceed those of 2023. This is on the assumption that the debt markets continue to normalise and interest levels return to more typical levels. We also see increased activity levels being driven by private equity funds having significant access to capital which was not necessarily put to use in 2023, therefore these sponsors will be keen to deploy such surplus capital 2024. Against this, however, is the backdrop of uncertainty and its inevitable impact on M&A activity, driven by a US election in late 2024 and an Irish general election in either late 2024 or early 2025,” says Grey.
“Ireland’s positioning in Europe, its educated workforce and relationship with the US continue to be strong drivers for M&A activity here. There are also a number of other factors which continue to drive international buyer activity in Ireland such as our stable and competitive corporate tax rates, access to a sophisticated local network of Irish financial and legal advisers and a generally stable and predictable regulatory and legal environment.”
Healthcare, financial services and IT were amongst the busiest sectors. Owen Hackett, managing director with Focus Capital Partners, sees healthcare in particular as being both a broad and active sector especially when subsectors such as social care, nursing homes, digital technology and medical distribution are taken into consideration.
“When looking at medical distribution we again see a highly fragmented market with many business owners looking to explore the different succession plans available to them. Some owners seeking to retire are looking for full exits while others want to cash out some of their shareholding while staying with the business to drive future growth. The profiles of these companies include high profit margins and strong, predictable revenues that are backed by long-term contracts. A fragmented market consisting of companies that have strong financial profiles with willing sellers and active buyers are always a good platform for M&A activity,” says Hackett.
Fergal McAleavey, corporate finance partner of EY, sees strong performance continuing, “We saw M&A volumes in Ireland remain strong during 2023 when compared to the US, UK and Europe which saw volumes decline by up to 30 per cent. This was predominantly driven by Ireland’s deal activity across the mid-market (enterprise values between €5m and €250m) which is the most active segment on the island, historically accounting for over 90 per cent of deals.
“The increase in financing costs over the past two years has impacted private equity activity in Ireland, which has allowed trade and corporate buyers to increase deal activity during 2023.”
Ronan Murray, also a corporate finance partner with EY, sees similar growth, “Based on our own analysis the Irish M&A market saw over 300 transactions complete in 2023. From these transactions TMT (technology, media & communications) has remained the dominant sector (particularly technology), with a strong performance and notable deals across other sectors such as renewable energy, and health science & wellness (HS&W).”
Digital transformation and new technologies have disrupted the business landscape for years, and this trend shows no sign of slowing down as the demand for quality technology solutions continues. This has seen the TMT sector become the most active in terms of M&A activity in recent years. Similarly as ESG strategies gain greater focus from company boards and regulatory bodies, and the demand for talented people increases as Ireland heads towards full employment, deal activity is rising across the renewables and HS&W sectors.
Going forward McAleavey credits Ireland’s position on the edge of Europe, its close links with the US and a talented English-speaking workforce being key factors in the island’s robust deal activity during 2023. “Brexit has also brought benefits with not only US investors but also UK investors looking for an entry point to the EU.”
Murray argues that he expects the Irish M&A market to continue its robust performance from 2023 into 2024.
“Many investors and businesses have been challenged in terms of financing deals due to elevated interest rates. However, this has started to show initial signs of cooling, giving some hope that interest rates may be peaking. Despite the global macroeconomic volatility the deal environment will likely remain robust as structural and strategic drivers in European M&A come into play, including divestitures, technology, ESG, and PE which will collectively shape the landscape,” says Murray.
Máire O’Neill, partner in the corporate/M&A department at William Fry, is also buoyant on future growth.
“The energy, infrastructure and utilities sector accounted for less than 10 per cent of Irish M&A by deal volume and value in 2023, but we expect to see a sharp uptick in the near future. Developers of these assets are facing high development and borrowing costs and may well look to international infrastructure investors to lay off minority stakes to de-risk the asset and benefit from sectoral expertise and partnership.
“With Government renewable targets increasingly to the fore, energy transition assets and renewable energy infrastructure projects are increasingly in vogue with investors and funds looking to satisfy ESG credentials. It seems inevitable that M&A activity in the EIU sector will increase as private capital turns its attention to these infrastructure assets, and nation states, including Ireland, seek to encourage investment in energy transition solutions,” says O’Neill.