An eventful 2016 resulted in a mixed year as regards M&A activity levels. The political landscape dominated the agenda with the Irish general election, the UK referendum decision to leave the EU and the outcome of the US presidential election.
In the first quarter of 2016, M&A activity reached significant highs. Many factors contributed including an improved economy, buoyant stock markets and cash-heavy balance sheets. Irish companies were involved in a number of large-scale transactions both at home and overseas including CoucheTard’s acquisition of Topaz Group for approximately €450 million and completion of the Paddy Power plc and Betfair Group plc merger.
The initial optimism gave way to uncertainty in the lead up to and following the UK’s Brexit decision. M&A activity levels declined markedly as boardrooms grappled with what the referendum decision might mean to their organisation and deal-making prospects, with inevitable consequences for investment levels.
Despite continued uncertainty, there was a pick-up in activity levels in the final quarter of 2016. During this period a number of landmark transactions were announced including Avolon’s US$10 billion acquisition of the aircraft leasing business of CIT Group, Sumitomo Corporation’s acquisition of Fyffes for €750 million and Greencore’s acquisition of US-based Peacock Foods for US$746 million.
Private equity has emerged in recent years as a major force in the Irish M&A sector. Carlyle Cardinal Ireland’s €157 million acquisition of AA Ireland was the eye catching domestic private equity deal in 2016.
Current sentiment amongst the deal making community is positive with 81% of survey respondents anticipating 2017 deal volumes at or above prior year levels. Interestingly, less than half of respondents expect that deal activity will be negatively impacted by Brexit in the short term. Respondents acknowledged the US presidential election outcome but most do not anticipate a significant impact in 2017. The longer term impact of these two events is less certain.
A number of respondents commented on the need to progress M&A strategy design and implementation notwithstanding uncertainty surrounding international events. Business can’t simply stand still.
Respondents anticipate that the most active sectors for M&A activity in 2017 will be the technology, agribusiness, healthcare and property sectors.
Current year survey data indicates a shift in preference towards Irish based assets over UK assets. Meanwhile, debt is the preferred form of finance for deals and disposals to strategic / trade buyers the preferred exit route.
We go to print in the week that Donald Trump was inaugurated and Theresa May gave her long awaited speech in which she further clarified the position on a “hard Brexit”. M&A will continue to have a significant role in the fortunes of domestic and international companies, but will have to do so navigating ever choppier waters.
We would like to thank all the M&A executives and advisors who took the time to complete the survey and inform our analysis.