Strong activity in the corporate transaction and mergers and acquisitions (M&A) markets this year comes as no surprise to Paul Hollway, head of corporate finance with KPMG, who predicted this scenario a year ago.
‘The signs of greater activity to come were there to be seen in 2014 and have come to fruition this year. From an Irish perspective, 2015 has seen a further appetite and confidence from banks with regard to lending,’ he said.
‘With more finance options available buyers and sellers are now transacting with a greater degree of confidence in the market, particularly with regard to M&A transactions, which are on the rise,’ said Hollway.
In tandem with improvements to our economy, there has been a strengthening of balance sheets. ‘More predictable lines of profits and revenue streams in companies makes it easier to reach a valuation that both parties – the buyer and seller – are comfortable with, ‘ he added.
His view is that transaction activity is at a healthy level, without being excessive or above what is sustainable. Sectors that he identified as particularly active are, healthcare, energy and power, with activity in financial services sector making a return and also the industrial, property and
Another development apparent to the team at KPMG is an appetite for equity finance in the med devices and technology sectors.
‘We have advised on many deals this year right across sectors. We have worked on numerous buy- in and buyout deals and I believe that over next 12 to 18 months we will see a lot more activity done on that basis.
‘It’s a trend driven by the fact that many majority shareholders had to stay in the business longer than planned because value simply was not at acceptable level to sell and junior management couldn’t fund it.
‘Now funding sources are available to allow junior managers finance a deal and shareholders who stayed on a little longer than they had planned for are now pleased to exit as they are realising true value.
‘I predict a lot of activity in this space over next 12 to 18 months in transaction sizes varying from three or four million euro right up to 50 million euro.‘
A recent development in the corporate transaction landscape, according to Hollway, is the growing number of younger shareholders. Investors not near retirement age who have built up a majority shareholding in a company are de-risking their investment by selling part of it.
By bringing private equity funds or growth funds into the business, they are effectively crystalising its value.
With the right advice and approach, Hollway said firms thinking of selling could achieve good value in the current market.
‘But many may have to reach outside of Ireland to make themselves noticed by European and US potential buyers,’ he added. ‘It’s a trend borne out by increased levels of cross-border activity at the moment.’
Access to finance has undoubtedly been the catalyst for the level of corporate transaction activities we have witnessed this year and Hollway believes the growth trend will continue in 2016.