Foreign investors mull possibility of Sinn Féin government as deal volumes slow

Potential foreign investors into Ireland have started to ask their local advisers about the prospect of a Sinn Féin-led government after the next election and how “business-friendly” it might be, according to a senior partner at one of Dublin’s top corporate law firms.

William Fry, which has released data showing 122 buyout and merger deals involving Irish companies worth €6.4 billion were conducted in the first half of the year, believes there is likely to be a slowdown in deal activity in the second half of the year, as investors fret over the economic impact of interest rate rises and geopolitical concerns such as Ukraine war.

Stephen Keogh, the firm’s head of corporate and M&A (mergers and acquisitions), said some potential foreign investors were also asking about the potential make-up of the next government, with an election expected in the next two years or so.

“As the time frame to that election shortens, it puts the potential members of a future government into sharper focus, and how business friendly it might be. That will certainly be something that will be a factor for UK and US investors coming into Ireland,” he said.

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When asked if foreign investors were specifically wondering about how a Sinn Féin-led government might act, he said: “Yes, they do sometimes ask this.”

Sinn Féin has previously committed to maintaining Ireland’s 12.5 per cent corporation tax rate, and appears to have strived in recent years to soften its image in the business community.

William Fry’s M&A report for the first six months shows there were 92 inbound deals (foreign buyers of Irish companies) worth €5.8 billion. Financial services deals, such as insurance brokerage buyouts, accounted for almost a third of Irish M&A. Overall, total deal value was down 66 per cent, although 2021′s comparative figures were inflated by deal displacement and delays due to lockdowns.

“Compared to before the pandemic, the figures are pretty healthy,” said Mr Keogh. “It suggests that, for the first six months, we were back to a normal level of mergers and acquisitions activity. But who knows what will happen over the next six months. There is a lot of uncertainty in the market.”

He suggested a slowdown was inevitable in the second half of the year. He said the war in Ukraine was “one ingredient in a bag of uncertainties” that is weighing on deal sentiment. “It is not conducive to a vibrant market.”

Mr Keogh said private-equity firms were “sitting on a lot of dry powder” in terms of capital that they had already raised, and this cash would, eventually, be spent on deals. But the prospect of interest rate rises meant the returns on this cash over the longer term might fall.

This would feed into lower valuations on private-equity buyouts, he suggested, and that it would take time for business owners to “adjust their expectations” on valuations when selling. “There is a new reality on valuations,” especially in the tech sector,” he said.

He said the Irish M&A market was still “resilient”.

“I wouldn’t be too negative about it,” said Mr Keogh.