M&A market expected to grow

The M&A market in Ireland should continue to grow in the coming year following a relatively robust and consistent 2017, according to the latest KPMG M&A Outlook for 2018. The report is based on a survey of Ireland's leading corporate executives and M&A advisers and provides a critical assessment of the mergers and acquisitions landscape in 2018 and beyond.

“2017 saw continuing strength in Irish capital markets, with significant IPOs including AIB and Glenveagh Properties,” says KPMG head of transaction services Mark Collins. “Deal volumes increased significantly in 2017 and this reflected a strong Irish economy, improved access to capital, the availability of suitable targets and a greater willingness to carry out deals following a period of pronounced geopolitical uncertainty.”

Irish corporates were at the forefront of international M&A with CRH, Kingspan, DCC, Kerry Group, Icon, UDG and One51 all active in the market in 2017, Collins adds. “Highlights included a number of landmark transactions including CRH’s acquisitions of Ash Grove Cement and Fels-Werke for €2.9 billion and €600 million respectively.”

Another significant feature was the further emergence of private equity, both in the context of international investment in Ireland and the prominent role played by Irish PE funds, with Carlyle Cardinal Ireland enjoying its first exit with the disposal of Lily O’Brien’s, announced in December.

Sense of optimism

Looking to the year ahead, there is a greater sense of optimism within the deal-making community, with 57 per cent of survey respondents expecting 2018 deal volumes above previous-year levels. In line with previous years, respondents expect the most active sectors for M&A activity will be agribusiness and food, technology, healthcare and property sectors.

Respondents also stated that further growth in M&A could be stimulated by developing awareness of targets and through enhanced preparation efforts on the part of vendors.

Debt is the preferred source of finance for deal activity but respondents anticipate a greater level of private equity funding in 2018, reflecting more competitive terms and the greater prominence of private equity in the market.

While Brexit features strongly on the radar of deal makers, there now appears to be an acceptance that business cannot stand still, with a number of respondents indicating a belief that Brexit carries significant strategic opportunities as well as risks.

“There is no doubt that Brexit continues to present a challenge to investor confidence and this is something that deal makers will keep a close eye on,” says Collins. “Overall, respondents to the KPMG M&A survey are looking forward to another active year in 2018.”