Irish merger and acquisition (M&A) activity fell sharply this year as the financing of deals with debt became more difficult globally amid rising interest rates, and as stock market volatility hit valuations across most industries.
The value of Irish M&A plunged by 55 per cent in 2022 to about €9 billion, while the number of deals dropped by 24 per cent to 243, according to figures compiled by EY Ireland and Dealogic. The data includes deals involving at least one party with operational headquarters in the Republic but excludes property transactions.
While Irish deal-making remained relatively resilient in the first half of the year, even as equity and debt markets had already begun to sour, activity fell in the final half as would-be buyers turned more cautious in the face of a weakening global economic outlook and many potential sellers struggled to accept reduced valuations for their business.
The total value of M&A globally had fallen 37 per cent to $3.66 trillion (€3.44 trillion) by Christmas, according to Dealogic data, after hitting an all-time high of $5.9 trillion last year.
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Covid backlog
“There was a large backlog of deals as we were coming out of Covid that kept the overall figures high in the first half of the year. But things started to slow in the third quarter,” said Fergal McAleavey, a corporate finance partner with EY Ireland. “There certainly has been a moderation in price expectations in recent months.”
Still, Mr McAleavey predicted there would be a pick-up in transactions from the early part of 2023. “The Irish economy is still growing and, now that price expectations have been reset, we should see more activity,” he said.
Growth in Irish modified domestic demand, a measure of economic activity that strips out multinationals based in the State, will slow significantly to 0.9 per cent in 2023 from 8 per cent this year, the Organisation for Economic Co-operation and Development forecast earlier this month.
The biggest Irish deal of 2022 was Dublin-based aircraft lessor Goshawk Management’s €1.5 billion takeover by SMBC Aviation Capital, according to the EY and Dealogic data.
UK infrastructure group John Laing’s agreement early last week to buy three of the Irish Infrastructure Fund’s four assets in a deal estimated to be worth about €1 billion is second on the list. The assets being sold in this transaction include a contract to operate the Convention Centre Dublin, telecoms towers business Towercom and primary healthcare firm Valley Healthcare.
Majority stake
Swiss private-equity firm Partners Group’s agreement in April to take a majority stake in Version 1 is believed to have valued the Irish technology services provider at about €800 million – allowing it to make the list of the biggest transactions of the year.
The largest deal announced globally in 2022 was Microsoft’s $68.7 billion planned takeover of game studio Activision Blizzard. However, completion of this deal is far from certain, with the US Federal Trade Commission taking a lawsuit earlier this month to try to stop the purchase going through.
The second-largest transaction unveiled was US chipmaker Broadcom’s $61 billion bid to take over cloud computing company VMWare. That proposed acquisition also hit a setback in recent weeks, when the European Commission opened an in-depth investigation into the deal, saying it was concerned it would be restrictive for competition.
Elon Musk’s $44 billion takeover in October of Twitter qualified for the third spot.
The financing market for leveraged buyouts all but shut down over the course of 2022 as central banks raised interest rates, forcing large private-equity firms to either write larger equity checks or abandon their takeover ambitions. Private equity-led buyout volumes slumped by 35 per cent during the year, according to Reuters.
