Investec records €1.3bn worth of M&A deals in second quarter

Smurfit Kappa's €460 million acquisition of Dutch recycling business Reparenco, and the acquisition of 90 Toys "R" Us stores across Germany, Austria and Switzerland by Irish retailer Smyths Toys for €79 million were among the notable transactions recorded in Investec's latest quarterly tracker of mergers and acquisitions.

Some 60 deals with a total disclosed transaction value of €1.3 billion were recorded in the second quarter, according to Investec.

This was ahead of the previous two quarters in terms of volume but down on the corresponding period last year.

The second quarter of last year was particularly strong with 74 deals worth €8 billion concluded, including Exponent's acquisition of DCC Environmental, Volpi Capital's acquisition of Version1, and Dubai Aerospace Enterprise's €6.9 billion acquisition of AWAS Aviation Capital.

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The latest report noted a total of 15 so-called in-market transactions, involving domestic buyouts, including acquisitions of Sisk Healthcare, Invesco and Rilta Environmental.

Infrastructure funds

There was strong activity from Irish plcs with transactions undertaken by CRH, Smurfit Kappa, United Drug and Paddy Power Betfair.

Investec also noted that financial buyers in the form of infrastructure funds were active during the quarter with the majority acquisition of Imagine Communications by Brookefield Asset Management and InfraVia's acquisition of Mater Private Group.

Investec said there was a “consistent spread of activity” across sectors, with deals recorded across the technology and telecoms, health and pharmaceutical, print and paper and retail sectors. There were 20 transactions announced by Irish companies acquiring foreign businesses further demonstrating the confidence of Irish companies expanding internationally by acquisition.

“Overall, despite the Brexit-related uncertainty lying ahead and a rising interest rate environment coming increasingly into view, domestic and international confidence in the Irish economy continues and coupled with Irish companies’ confidence in their own outlook this should see continued levels of meaningful activity in the second half of 2018,” the financial firm noted.

Outbound transactions

Liam Booth, managing director of Investec Corporate Finance, said: "The cost of capital is low and very efficient and that is driving conveyancy here."

He said the increased level of outbound transactions also reflected the increasing number of firms here which saw acquisitions as the best way of establishing a foothold in new markets. Mr Booth cited DCC’s recent foray into North American as an example.

But acquisitions were also an efficient way of consolidating existing market positions and availing of cost synergies, he said.

While the days of super-low interest rates may be numbered, Mr Booth said capital is and would remain cheap by historical standards.