The low ratings which fund managers are giving Irish second line stocks compared to their counterparts in larger companies in Britain is a cause for concern, according to the new chief executive of Investment Bank of Ireland (IBI) Corporate Finance. Mr Peter Crowley, who has just taken over the role, says there are small well-run Irish companies whose opportunity to expand is being "hamstrung" because of it.

Mr Crowley says that these firms are well-managed, with good cashflow and "ideas about what they want to do to develop the company". However, they are getting lower ratings than bigger companies operating in the same sectors abroad.

Since the euro's introduction many European fund managers have decided to concentrate on bigger, higher-rated European stocks. The managers have argued that they do not have time to follow smaller companies when the new single currency allows them to invest anywhere in Europe in large companies with no currency risk.

"It is a source of concern to those [smaller] companies because any potential acquisition they are looking at appears expensive as compared to their own rating, and they would be loathe to fund any acquisitions with a rights issue or paper issue because their paper is so lowly rated," says Mr Crowley. "It does put them into a bit of a box and that's not a good thing."

Mr Crowley hopes a substantial amount of the smaller companies will eventually be re-rated. "The institutions should settle their portfolios to be the way they want them. Then the larger companies will have very full valuations."

He says investors should then emerge to concentrate on the smaller companies. "The well-managed second liners should benefit from that."

However, he says that in the meantime they should be examining ways that fit in with their overall strategy to increase the scale of their operations.

"Apart from that they need to stick with what they are at, run the company well and wait for the rerating," says Mr Crowley, who returns to IBI, the corporate finance arm of Bank of Ireland, following three years as a director of Sigma Communications, the telecoms group which includes mobile retailer Person2Person.

IBI is currently working with a number of second line Irish companies to find ways of developing their operations in the current investment climate, he adds.

However, he says, it doesn't necessarily mean that a "gangload" of second liners are now going to be taken private. "I think Clondalkin is a case in point. I think there are a few other companies which might be suitable for that [a management buyout], but putting a huge amount of debt onto a company's balance sheet might be fine for some, but for others they actually need the flexibility to spend a lot of money rather than taking out the existing shareholders."

Mr Crowley who previously spent five years at IBI has worked on several large deals, including the Aer Rianta buy-in to Birmingham Airport, in which it took a 20 per cent stake. He describes this as an "amazing transaction". It was "the first time Aer Rianta had set out its stall as being a foreign investor in airport assets with expertise in airport management".

The deal was incredibly complicated, he says, because it involved Aer Rianta itself, two Government departments (Finance and Public Enterprise) and seven local councils in Birmingham. An added complication was that one of the terminals had been sold to private interests.

"We had to roll it all up into one deal, plus organise financing with NatWest Capital Markets," he says.

The Waterford Wedgwood buyout of Stuart Crystal in Britain was another "fascinating transaction". He says there were differences within the Stuart family and that Waterford came in and backed one side. "In effect, it was almost like a hostile takeover of a private firm," he says.

For Waterford too, it sent a signal to the market that the company had bounced back from a restructuring process and was back in expansionary mode. "Plus, it was extremely complicated and that's what guys like me [corporate financiers] get off on, I suppose," he says.

Every deal is different, he says. "You can't have a formulaic approach."

Often, he says, the key to clinching a deal is "knowing the business well enough to take a slightly less restrictive set of conditions than somebody who is competing with you for the business.

"It's a question of identifying your strengths - or the client's strengths as the case may be - and then playing to them."

As a corporate financier he believes the value a company such as IBI provides is that it can stand back and identify what is or is not a good deal for the client. "And not be afraid to say no," he says.

For example, he says, some companies will say they will only do a deal subject to certain conditions such as checking the books, interviewing the senior managers, getting clearance from regulatory authorities. Many of these are standard conditions, says Mr Crowley, but "if you can eliminate one or two of them, which the opposition cannot do, then this may be what gets you across the line, rather than price".

He says that's the value a corporate finance company such as IBI can provide: "We are able to stand back from it and identify a couple of things, in tactical terms. And also we are not afraid to say no - you should walk away from this deal, it has got too rich."

Mr Crowley says the details of a company's acquisition of another business are sometimes leaked. This can put a lot of pressure on the management to complete the acquisition.

Normally, he says, there are several "factions" or elements driving a deal. These include the director(s) who "are wedded to the deal" and are driving it very hard, and the board of directors who although they may not disagree with the proposition, believe it is their duty to question it."

The parties may not be at loggerheads, but they do have to be considered when putting a deal together. Much of a corporate financier's work involves advising on issues such as restructuring and on structuring a rights issue and where it will be carried out and the desired mix of institutional investors etc. It can also involve matching the venture capital company or investor, with the client firm.

Mr Crowley says the forthcoming privatisations of State companies such as Aer Lingus, Aer Rianta and ESB will help bring a better balance to the portfolio of Irish Stock Exchange companies. "It will increase the total capitalisation of the market."

He does not believe that the Eircom flotation experience will affect future flotations. Like many others, he believes that the share may have been priced a little on the high side and a lot of preflotation hype surrounded it. The company will have to be assessed post-flotation, he says, and this will take some time.

Mr Crowley says it is too early to say if technology stocks are overvalued and points out that pension funds have millions to invest, but the proportion of equity they put into such stocks is very small.

"With technology stocks, it is a question of what is the right model. People are questioning whether Internet stocks such as Freeserve - an internet portal - merits the same valuation as say Amazon.com, which is a value added service provider."

One thing is certain, he says, while some ventures will fail, there will be others which will make a fortune. "As always, it is a question of backing the right one."

In his work as a corporate financier he has found that investors have begun to take a less traditional approach to investing. They are no longer hung up on investments which are heavily asset backed. He cites Marlborough Recruitment and Sherry FitzGerald as examples of this. "Investors have begun to realise that there is no reason that people, for example, cannot be as valuable as other assets," he says. "Investors are now a lot more mature."

However, he says small Irish companies, especially tech companies, often have to seek several tranches of funding. When seeking funding it is important to ensure you seek a sufficient amount. He says that investors like to see that the product is developed before a flotation.