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The big business deals of the year

The big M&A, venture capital and private-equity deals of the last year involving Irish fintechs, a forecast plus a look at what is driving the activity

Deal-making returned to full power last year following a dip in activity in 2020 as the pandemic took hold; 2021 was a bumper year for M&A activity in Ireland in terms of both deal volume and deal value. Mergermarket reported a 33 per cent increase in the number of significant M&A deals in 2021 compared with 2020 (the highest deal volumes seen in Ireland since 2006), and a 185 per cent annual increase to an impressive total value of €24.6 billion.

Caroline Kearns, partner in the corporate M&A department within the financial institutions group at Matheson, sees a number of factors as contributing to the increase in activity:

“There was a spillover from deals that were paused in 2020 due to Covid. Then strong corporate balance sheets, record levels of dry powder among P/E funds, low interest rates and easy access to debt, strong equity markets and the continued digitalisation and decarbonisation of the economy all added to the heat,” she says.

The hottest sectors were financial services and technology, according to Máire O’Neill, partner in the William Fry corporate/M&A department.


O’Neill noted that financial services accounted for almost 30 per cent of deal activity by value. By volume, TMT – or technology, media and telecommunications, especially technology – was the most active sector as digital transformation continues to be a key driver for businesses who are already, or becoming increasingly more, reliant on technology, automation, digital content and data-driven assets,” says O’Neill.

The high number of large value transactions last year were led by Allied Irish Bank’s €4.1 billion acquisition of Ulster Bank Ireland’s commercial loan book. Last year also saw the sale of Davy in three separate deals – the sale of J&E Davy’s wealth management, capital markets and associated businesses to Bank of Ireland; the sale of Davy’s fund management business, Davy Global Fund Management, to IQ-EQ; and the sale of Davy’s shareholding in Rize ETF.

At mid-market level, consolidation activity remained strong in the financial intermediary space where aggregators backed by P/E are pursuing aggressive growth by acquisition strategies. Aston Lark, a UK-based chartered insurance broker, is one of the key aggregators in this space – it had just announced its 50th acquisition (eight of these being recent broker acquisitions in Ireland). Aston Lark was backed by Goldman Sachs Asset Management and Bowmark Capital, and have themselves been recently acquired by Howden, an international insurance broking group.

Kearns sees deal activity primarily being driven by well-capitalised international corporate buyers and private-equity sponsors (or P/E backed portfolio companies undertaking bolt-on transactions).

“Private-equity interest in Irish-founded businesses remained a key feature and the continued increase of financial sponsors active in Ireland shows no sign of abating, particularly in the emerging high-growth sectors. Nine of the 20 highest-value deals of the year were private-equity related, including seven exits,” says Kearns.

Inbound activity was strong as international buyers contributed to the high activity levels – inbound M&A deals were valued at €19.2 billion last year, with a particular interest from US-based buyers at the top end of the value spectrum who accounted for €13.2 billion (more than half) of last year’s deal values.

Kearns observed there is also continued activity in trade buyouts by corporates in the traditional sector areas which is playing out in two ways.

“Firstly we are seeing corporates consolidate their existing positions through acquisitions – in particular the two big banking deals – and secondly, corporates are looking to bolster growth and performance through acquisitions which bring technology as well as other complementary offerings to their core businesses. This is particularly evident in the financial services space where firms are increasingly targeting acquisitions and partnerships with fintech firms to access emerging technologies such as regtech solutions,” says Kearns.

Looking at Venture capital investment, O’Neill witnessed soaring value in 2021.

“Globally, it reached a staggering $115 billion with a record €1.3 billion into Irish tech start-ups and SMEs. This represents a 44 per cent increase from €925 million the previous year. The breadth of fintech solutions being offered by scaling companies has attracted VC investment – particularly in cryptocurrencies and blockchain, cybersecurity and AI. Fintech unicorn Wayflyer’s $76 million VC raise was one of Ireland’s most notable fintech investments in H1 of 2021,” says O’Neill.

O’Neill also views Ireland’s well-developed fintech ecosystem as having undoubtedly created a hub for our homegrown fintech companies, both regulated and unregulated. A number of key government organisations and incubators have emerged in Ireland in recent years to support and further develop the growing fintech sector, and in doing so encouraged fintechs to thrive.

“Our skilled and educated talent pool, along with the strong financial services industry and global tech presence here in Ireland, has seen the pool of available talent seize opportunities to both establish and join emerging Irish fintechs playing on these strengths. Irish fintechs such as Stripe and Fenergo have also made waves internationally,” says O’Neill.

Private-equity activity increased in Ireland in 2021, with deals totalling €10.76 billion, which was a 135 per cent increase in value from 2020. There is continued interest from international financial sponsors, which is particularly evident in the higher deal value range: international P/E was a feature in nine out of the 20 largest deals last year.

A further driver of activity and high valuations in the past year was the wave of P/E exits from Irish businesses backed by private equity, as those P/E funds reached the end of their three- to five-year investment cycle and looked to achieve an exit while the market was hot. The most common exit paths were onward sales to P/E buyers and trade sales. One exit path for private-equity investors that narrowed somewhat in the past 12 months was the special-purpose acquisition company (Spac) market, which is expected to be less buoyant due to increased regulatory scrutiny in the US.

Kearns noted that in addition to impacting deal flow, P/E market participants are also driving high deal values as Irish companies benefit from the expertise in scaling businesses internationally which those private-equity houses bring to the partnership.

“Domestic sponsors, often with ISIF [the Ireland Strategic Investment Fund] as a cornerstone investor, also continue to drive activity and play an important role at the lower valuation ranges and earlier stages of the growth cycle of Irish companies,” says Kearns,

Looking forward, Alan Mahon, head of Equity Capital with AIB, while also being active in this market, reckons 2022 will see increasing focus on sustainability, a trend that has gained significant momentum in recent years.

“Since the recent Cop26 climate summit, the green agenda has taken on a renewed sense of urgency and will likely become a top priority for companies and investors as we approach 2022. For example, AIB has committed to being Net Zero by 2030 with the stated ambition

That green products will account for 70 per cent of all AIB’s new lending by 2030. In addition, AIB has partnered with the Foresight Group as a cornerstone investor in the AIB Foresight SME Impact Fund, established to invest in Irish SMEs supporting the transition to a more sustainable economy. As such, ESG-aligned investments are expected to grow as both companies and investors increasingly prioritize or target a broader range of ESG fundamentals. We may see growing focus on ESG capabilities offered by fintechs as there are big opportunities for Irish fintechs to develop innovations in this space,” he says.

Rising regulation of tech innovation should also be considered as the fast growth in this sector attracts greater regulatory scrutiny, and an assessment of regulatory risk should be a key focus for dealmakers in the fintech space and the tech industry more broadly. This level of supervisory oversight may impact players in a previously unregulated space but will also create opportunities.

“The wind is not out of the sails yet but we are operating in a different environment this year due to the geopolitical fallout from the war in Ukraine, rising interest rates and continued global supply-chain disruptions,’ says Kearns.

Private-equity fundraising rebounded in 2021 and this fundraising momentum has continued into 2022 as major global private-equity players undertake additional capital raises to add to reserves of deployable capital. So while debt markets are subdued, which is having an impact on M&A activity levels for debt-backed market participants, there is still plenty of dry powder to be deployed and Ireland remains an attractive and stable jurisdiction for investment.

Jillian Godsil

Jillian Godsil is a contributor to The Irish Times