MERGERS & ACQUISITIONS:M&A deals dropped in value by €3.7bn but transactions held up
The value of corporate transactions involving Irish companies fell sharply last year, although the number of deals was identical to 2011.
Total deal value was €5.5 billion, down on 2011’s €9.2 billion. However, we would attach greater weight to deal volume as opposed to value as a measure of MA activity as it is more likely to indicate activity across several sectors, different types of transactions and a greater willingness of companies and management teams to make the strategic choices that corporate transactions involve.
Last year saw 228 such transactions, 10 ahead of 2011 and well ahead of the trough years of 2009 and 2010, when the figure was below 150.
A key reason for the reduced deal value recorded was the absence of €1 billion plus transactions featured in 2011, including €3.4 billion of investment into Irish banks by Government and private investors.
The level of activity was evenly spread throughout the year. However, consistent with previous years, the majority of significant transactions took place in the second half of the year.
These included Ardagh’s acquisition of US-based Anchor Glass Container for €720 million, Petroceltic’s acquisition of Melrose Resources for €478 million and Tullow Oil’s acquisition of Spring Energy Norway for €360 million.
In terms of category or deal types, the larger transactions mainly involved large Irish corporates acquiring businesses abroad. This has been a trend for a number of years as these larger corporates, in the main plcs, have the ability to fund acquisitions and continue to expand into foreign markets.
In fact foreign acquisitions by Irish companies accounted for just less than 50 per cent of all deals by volume and around 65 per cent of total deal value during 2012.
However, in Exponent’s acquisition of Fintrax we have seen one of the largest private equity transactions of an Irish business in several years.
A number of deals took place on foot of bank-driven restructurings and other administrative processes including the acquisition of Clerys by Gordon Brothers Group, A-Wear by Jesta Group Retail, Blackstone’s acquisition of the Burlington Hotel and Hevac’s acquisition of Heat Merchants and Tubs Tiles. This type of deal, often involving deep value-driven financial acquirers, are ones we expect to see more of in 2013.
Those sectors which saw the greatest level of deal activity during the year were IT and telecoms with 45 deals (2011: 28); building, construction and property with 40 deals (56); industrial with 28 deals (23); and healthcare, pharmaceuticals and financial services each with 21 deals (15 and 36).
IT and telecoms has increased in importance over the past few years – it has sustained deal volume levels with that achieved in 2006 and 2007 and surpassed this in 2012 with 45 deals and a total deal value of €356.9 million.
The building, construction and property sector saw 50 deals including 35 by CRH and its subsidiaries. However, Kingspan made two notable foreign acquisitions in Thyssenkrupp Construction and Rigidal Industries for an estimated total consideration of €100 million. The financial services sector was not as active as in 2011, with 2012 more notable for loan book disposals as opposed to capital investments.
However, corporate transactions throughout 2012 included AnaCap’s acquisition of IFG Group plc’s international division, the acquisition of NCB by Investec and the acquisition of Dolmen Stockbrokers by Cantor Fitzgerald.
The MA market will show a similar if not improved level of activity in terms of deal volumes this year. IT/telecoms, financial services and food/food services will see a significant number of transactions.
This year will also see deals involving Government-owned, including semi-state, assets and businesses. We expect an increase in deals driven by bank restructurings and other administrative processes, continued foreign acquisitions by large Irish companies and potentially some increase in conventional buyout transactions.
Jonathan Simmons is director, NCB Corporate Finance, part of the Investec Group
