Irish businesses’ appetite for mergers and acquisitions (M&A) remains healthy, said KPMG, even as companies move away from using debt financing to fund deals amid surging interest rates.
A KPMG survey of more than 150 Irish M&A executives showed a near consensus that deal-making volumes are likely to return to pre-2022 levels in 2023 after the “record levels” observed last year.
Just 16 per cent of respondents said they expected higher deal volumes in 2023 while 44 per cent said they believe transaction levels will be broadly stable from last year. The remaining 40 per cent said they expect volumes to decline this year.
However, some three-quarters of respondents said they wish to pursue M&A opportunities in 2023 to capitalise on still-healthy appetites for inorganic growth. Deal-makers expect some sectors, particularly tech and healthcare, to be more resilient than others in the face of changing sentiment and market conditions.
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“High-quality Irish targets continue to be of interest to both international and Irish investors,” said Mark Collins, partner and head of deal advisory at KPMG. “Particularly given the macro environment, diligence in all its forms will be essential to validating investment returns.”
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Meanwhile, as central banks continue to tighten monetary policy in response to soaring inflation, debt is becoming a less attractive source of funding for deals, the survey indicates.
“In a shift from prior years,” KPMG said, just over half of respondents identified availability and cost of financing as the primary obstacle facing deal activity with 39 per cent citing the inflationary environment as a concern.
David O’Kelly, partner and head of M&A at KPMG, said: “Although respondents expect 2023 to be a buyers’ market, we expect continued competition for attractive Irish businesses in select sectors such as healthcare and financial services. Appetite remains strong from private equity with record levels of dry powder and corporates with strong balance sheets. We continue to see strong competition for targets with resilient business models and high-performing management teams.”
Separately, figures published by the Competition and Consumer Protection Commission last week indicated that the number of proposed deals that were notified to the regulator last year declined 16 per cent on 2021.
