The Irish mergers and acquisitions (M&A) environment has remained robust in recent years, says Phil Fogarty, corporate partner, A&L Goodbody; deal volumes marginally increased in 2024, with 508 deals involving Irish targets reported on Mergermarket last year versus 501 in 2023
“This bucked the trend of a slowdown in activity globally and speaks to Ireland’s attractiveness as a destination for international investment,” says Fogarty.
“Looking ahead to 2025, we are cautiously optimistic that this growth trajectory will continue. Outside of Ireland, our US and UK-based clients are reporting increased confidence in the M&A outlook more globally.”
Green shoots are starting to appear as M&A activity has recently increased in the US, with one of the key driving factors in this regard being an expectation that the level of regulatory scrutiny on transactions will decrease under the new regime, and there are signs of substantial deal preparation and pipeline building both there and in the UK, says Fogarty.
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“From an Irish perspective, we believe an increase in global enthusiasm will only serve to benefit Irish targets and sellers,” he adds.
Ireland has shown resilience in navigating recent economic challenges, outperforming several European counterparts and bolstering investor confidence, says James Toomey, M&A advisory partner, Deloitte.
“A well-received national budget, combined with strategic government investments in infrastructure, innovation and talent development, has created a stable and dynamic environment for deal-making.
“International acquirers increasingly view Ireland as a strategic gateway to both the EU and UK, while private equity thrives on favourable market conditions.”
Another factor fuelling optimism is the increased interest in Irish assets from private equity investors, both Irish and international, says Fogarty: “Private equity players are mandated by their own investors to be active dealmakers and the amount of capital they have available to invest is at a record high and growing.
“In recent years, the pressure to deploy capital has been outweighed by instability in the debt markets and a stubborn gap in valuation expectations between buyers and sellers. As those two factors resolve themselves and reach a correction point, we believe private equity investors will return to the M&A market in a material way.”
There are many things to be aware of but a couple of points worth considering are understanding the growth timeline of the business and how pivotal a role the owner currently has in its operations, says Owen Hackett, managing director of Focus Capital Partners.
“It is rarely the case that a business owner can walk away from their business the day it sells – unless they have spent years ensuring the business can operate independently without them,” Hackett adds. “If the company is still heavily reliant on the owner, buyers will likely require an earn-out, where final consideration is tied to achieving projected financial targets.
“This means that the seller remains financially exposed to the business’s future performance. If structures have not been put in place that will allow an owner to walk away on completion, they need to ensure that they get the timing right for their M&A process so that it allows them to maximise their consideration over the course of a two-to-three-year period.”
Hackett says any sign of the business declining during the earn-out period will likely affect the final payout.
“Selling while the business is on an upward trajectory, with strong momentum and a well-established management team, is key to maximising value and ensuring a smoother transition,” he says.
For owner-managers, it’s also important to be aware that working through an M&A process can be time consuming and emotionally draining, says Fogarty.
“It can often take at least 18 to 24 months from the decision to engage in a process to completing a transaction,” he says. “Managing that process often becomes a second full-time job for business owners who are already stretched. Surrounding yourself with the right people, both in terms of internal and external support, is the best antidote to this.”
Owners must forward plan well in advance of bringing a business to market to allow sufficient time to enhance its key selling attributes, the better to attract the right buyers and maximise price, says Rory O’Keeffe, partner in deal advisory at BDO Ireland.
“Consideration should be given to how the business will be valued – will it be on a revenue or EBITDA [earnings before interest, tax, depreciation and amortisation] multiple? And then business owners should focus on maximising this in advance of sale,” says O’Keeffe.
“Developing a growth plan for future earnings and scalability, and building a strong management team is also crucial. Ensuring financial and legal soundness through presale vendor-initiated due diligence reviews and seeking advice from financial and legal experts can prevent issues arising during due diligence, and ensure the business is presented attractively to buyers.”
While the M&A outlook is positive, the due diligence process will remain intensive, warns Toomey.
“Sellers should focus on early exit preparation. Spending time preparing your business in advance of a sale is critical and directly impacts shareholder value and deal deliverability.”
Advance preparation not only minimises execution risk, it also drives value, says Fiachra Cork, a partner in the William Fry corporate M&A department.
“Being able to present your business in the best light is essential for maximising price,” says Cork. “Buyers will approach transactions with a team of professional advisers that will undertake a deep dive into all areas of the business and, more often than not, buyers will try to discount their offer where risks and issues are identified.”
To get ahead of this, business owners, alongside their advisory team, should carry out preparatory internal due diligence, Cork advises. For larger deals this can take the form of vendor due diligence which is an independent verification of this preparatory work and gives the buyer a level of comfort over what they’re buying.
Cork says key items that can be identified and addressed during this preparatory phase include whether financial performance can be strengthened by improving profitability, minimising debt or by optimising operational efficiencies. Can any existing legal issues be dealt with? If not, be ready to address buyer concerns. Are company records and legal contracts up-to-date, properly documented and organised in an accessible manner? Work with your advisory team to gather what buyers will expect to see.
“Buyers can lose confidence in a deal if there are significant information gaps or delays in providing information after the sale process kicks off,” says Cork. “Despite the best will in the world, valuation gaps often arise between a buyer and a seller. Creative solutions, such as earn-outs, deferred payments, price adjustment mechanisms and equity rollovers, can be used to bridge these gaps and increase potential payouts for sellers.”
Owners should ideally start preparing their business for sale at least one to two years in advance, says O’Keeffe. “This time frame allows for comprehensive improvements in financial performance, operational efficiency, and market positioning. It also provides ample time to address any financial, legal or compliance issues, making the business more appealing to potential buyers. By taking these steps owners can present a well-prepared, robust business that commands a higher valuation in the marketplace.”
Certainty over future performance of the business is often key to maximising price as this is key to an acquirer, says Hackett.
“Consider all of the risk areas that buyers usually highlight when considering risks around future performance such as customer concentration, key contract terms such as expiry dates and so on, reliance on suppliers, strength of the management team and any gaps, and retention of key staff.
“It can take time to make sure that all of these risks are addressed but having them covered before bringing your company to the market will help maximise value. This ensures that the company is ‘investment ready’ before approaching acquirers or investors.”
Also, owners should make sure that they are running the business with a strong finance function in place, Hackett adds.
“Many businesses undervalue the importance of having a strong finance function as it is frequently viewed as a cost to the business rather than a department that can offer value,” he says.
“A strong finance function can provide management with a deeper understanding of which activities are driving revenue growth and profitability, while also ensuring the company’s cost structure is optimised – all of which contribute to driving value. If a business owner’s ultimate goal is to sell their business at some stage, these are all factors that need to be considered while they are running and growing the business and not areas that are looked at just before putting the business up for sale.”
An auction process may deliver the best outcome, Cork notes. “Market conditions are favourable and there are plenty of buyers out there. Time and again we are seeing clients achieve phenomenal outcomes, both on price and contractual deal terms, where several interested parties come to the table.
“It may sound obvious but running an auction process over a bilateral one to sell a company can be a fantastic exit strategy to capitalise on this competitive tension.”
Selling a company is often one of the most significant and emotive financial transactions undertaken by a business owner, Cork adds.
“Balancing the demands of the sale process with the ongoing management of the business requires considerable time, effort and resources,” he says. “However, sellers should not lose sight of the underlying business, and it is essential to ensure that daily operations continue to run smoothly until the sale completes, to maintain the company’s value and appeal to the buyer.”
Five steps to maximise value
- Plan well in advance: Start preparing your business for sale at least one or two years before bringing it to market. This allows time to improve financial performance, strengthen operations and resolve legal or compliance issues.
- Ensure the business can operate without you: If the company heavily depends on the owner, buyers may require an earn-out (where the final price is tied to future performance). Building a strong management team before selling can maximise value and ensure a smoother transition.
- Conduct presale due Diligence: Buyers will conduct thorough checks, so business owners should proactively review financials, legal contracts and operational risks to present the company in the best light.
- Maintain strong financial performance: Optimising profitability, reducing debt and ensuring a well-structured finance function will enhance valuation and appeal to buyers.
- Create competitive tension: Running a structured sale process, such as an auction with multiple interested buyers, can drive up the price and lead to better deal terms.
