Some years bring major M&A surprises. The ill-fated Daimler-Chrysler merger, for example, or the time that Bill Gates rode to the rescue of an ailing Apple. Some years bring less headline makers but at least have a few deals to raise the eyebrows. Last year, 2017, however, seems to have been noteworthy for the being the year that surprised by carrying on with business as usual.
"The main surprise was the fact that Brexit didn't have the impact we thought it might," says KPMG head of transaction services Mark Collins. "International events didn't really have an impact except on UK- and sterling-denominated assets. If anything, we have seen money migrating to Ireland because of it, as Irish assets are seen to be more strategic. Perversely, Brexit could be an opportunity for Ireland in this case."
He explains this lack of reaction probably reflects the realities of business life. “The M&A community still has to deploy funds. Companies still have to pursue growth strategies. They’ve just got to get on with life and with their businesses. They have to be conscious and aware of what might come at them from Brexit but they can’t allow that to prevent them from doing anything.”
BDO corporate finance partner Katharine Byrne agrees. "The main surprise for 2017 was the volume of M&A activity despite the uncertainty of Brexit, the Trump administration and other geopolitical changes," she says. "Total deal volume was stable when compared to 2016 and 2015, demonstrating the underlying strength of the Irish M&A market. Although reported deal value fell by more than 45 per cent, with fewer mega deals being completed and an increased focus on mid-market transactions, many of which are not disclosed."
Davy corporate finance director Nicholas O’Gorman takes a somewhat different view. “Every deal should be a surprise when it is announced,” he argues. “Something has gone wrong in the process if the deal isn’t a surprise. The market shouldn’t know about it until it is announced.”
Paul Keenan of Capnua takes a slightly contrary view as well. “I find it surprising that not as much M&A happened as I thought would,” he says. “There are a lot of business owners out there who found themselves locked into their companies and couldn’t sell them for the past 10 years, owing to the recession. With valuations now back up, there should have been more transactions. Those business owners should definitely be considering what to do. The US has had eight to nine years of growth. We are definitely closer to the top now than we are to the bottom.”
Brexit
He does agree that Brexit doesn’t seem to have had much of an effect or been factored into prices but is not surprised by that. “I’m an optimist,” he declares. “We started Capnua in the middle of the recession and I can’t believe the change now. There was no money then and there is a lot of it now and this will fuel M&A activity and valuations.”
Mark Collins did find one deal to surprise him during the year though – the acquisition by Amazon of the Whole Foods grocery retail chain for $13.8 billion. "The goes against the core of what they have been about up until now and is indicative of a new strategy. The want to exercise much more control right up and down the verticals. We are seeing the same with other big tech giants like Google and Facebook going up and down the value chain into property, retail and so on. They are also acquiring massive property portfolios. We will see more deals like Whole Foods in future."