Interest rate cuts in 2024 could lay the foundations for an increase in Irish mergers and acquisitions (M&A) activity after a modest decline in the number of deals completed in the Republic last year, corporate financiers say.
Some 405 mergers or acquisitions were completed in the State in 2023, according to Davy Corporate Finance’s M&A review of the fourth quarter of 2023. While this represented a 9 per cent decline on the previous year, Davy said the level of activity remains well above the 15-year average.
Volumes slid from a record 446 in 2022 when the impact of the Covid-19 pandemic receded and pent-up demand was unleashed on the market.
However, the pandemic appears to have ushered in a “step change” in the Republic’s M&A market with the 405 deals completed last year, representing a 38 per cent increase in average deal volumes for 2018 and 2019, the two years immediately preceding lockdowns.
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The relatively high level of activity in the market last year is notable, Davy said, given the sizeable 23 per cent slump in global M&A last year amid soaring interest rates.
Looking ahead, the report suggests the ongoing decline in Irish and European inflation could pave a path towards interest rate cuts in the next calendar year.
In that context, the Irish M&A market is expected to move into “growth mode” as central banks shift “to a pro-growth, rate cut cycle”.
“We therefore think that while 2023 was a year of resilience in the Irish M&A market, 2024 will be a year of growth,” the analysts said. “We expect rate cuts rather than rate volatility to dominate the agenda and spur economic activity both in Ireland and abroad.”
Values were disclosed for just 21 per cent of deals last year, totalling €33.3 billion, with the largest being the €19 billion merger of Smurfit Kappa with its US packaging rival WestRock.
CRH was responsible for two of the top five largest acquisitions with its €1.9 billion deal for Texas company Martin Marietta Materials in the No 2 spot and its €1.2 billion takeover of Sydney-listed Adbri at No 5. Other large-sized deals completed in the year include Italian pharmaceutical company Chiesi’s €1.3 billion acquisition of Amryt Pharma.
UK companies remained the largest foreign acquirers of Irish assets, according to the report, representing 14 per cent of the total number of deals. However, domestic in-market Irish deals represented the largest share of transaction volumes by type in 2023 at 23 per cent.
Private equity activity in the Republic continued to ramp up in 2023 as investors sheltered from macro challenges in other markets. Private equity deals accounted for 15 per cent of the total market last year, up from 14 per cent in 2022 and just 7 per cent in 2021.
Tech and telecoms remained the dominant sector in market, a status it has held since 2013, accounting for 22 per cent of the total by sector, with highlights including the sale of Terry Clune’s Immedis to US company UKG in June for €575 million and Softbank’s €473 million deal for Barry Napier’s Cubic Telecom in December.
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