Mergers and takeovers up but value falls

The Republic saw a sharp rise in merger and takeover activity in the third quarter of the year but the business was dominated by smaller deals.

Despite a 40 per cent increase in the number of transactions over the same period last year, the second successive quarter reporting such a rise, the value of merger and acquisition business in the three months fell 82 per cent on the year-ago period.

Last year's figures were skewed by several major deals, including the leveraged buyout at Jefferson Smurfit and the sale of AIB's Allfirst subsidiary in the United States to M&T Bank following the costly Rusnak fraud.

There were also two major management buyouts at Green Property and food wholesaler/SPAR franchise holder BWG.

The largest deal in the most recent period was CRH's €693 million acquisition of Dutch rival Cementbouw. On its own, the CRH deal accounted for 45 per cent of disclosed merger and acquisition business by value in the three-month period.

By contrast, the three largest deals in the third quarter of 2002 all broke the €1 billion barrier.

The M&A Tracker Survey is produced by Ion Equity, the corporate finance house. Ion director Mr Joe Devine said the average deal size in the third quarter tended to be low, with most less than €10 million. Overall, the value of acquisitions disclosed during the three months was €1.54 billion compared with €8.3 billion last year.

"As in previous quarters of 2003, several transactions have been prompted by restructuring or balance sheet considerations, with corporates not yet focusing on larger strategic acquisitions."

He said a recurring theme in the last two quarters had been a resurgence of business in the IT and telecoms sector, which together accounted for a quarter of the 56 deals completed in the period, although most deals were small. He attributed this both to "consolidation opportunities and evidence of green shoots in certain sectors".

Mr Devine was cautiously optimistic about the future of corporate activity although he said the trend of a larger number of smaller deals was set to continue.

There were six management buyouts during the three months to September.

These included NCB Stockbrokers, Biotrin and DMC Medical, which between them were worth €30 million.