Advice from the top Irish M&A experts

Stephen Keogh, head of William Fry’s corporate department

The single most important aspect of ensuring a smooth mergers and acquisition (M&A) transaction is communication, says Stephen Keogh, head of William Fry’s corporate department. “The best dealmakers I have seen maintain an unrelenting focus on keeping all parties aligned on the process, on agreeing which issues have been closed-off and which issues remain outstanding, and making realistic proposals for reaching agreement on the open points.”

He says this typically starts with a well thought-out term sheet, heads of agreement or letter of intent that hopefully manages to strike the right balance between addressing all key areas without getting into the absolute nitty gritty of the detailed drafting that will follow in the “long-form” documents.

“It is also important, if possible, to try to maintain a healthy level of goodwill between the parties as the transaction progresses. On larger and more complex transactions some last minute, unexpected, issue will frequently arise which can require one side or the other (or both) to demonstrate additional flexibility or creativity. If you are the party that is seeking such an accommodation, it’s important to have built up sufficient credit in the ‘goodwill bank’ prior to that point.”

Anya Cummins, partner, mergers and acquisitions, and head of Deloitte Private, Deloitte

The key thing is preparation, says Anya Cummins, partner, mergers and acquisitions, and head of Deloitte Private, Deloitte. “If you want to run a really smooth process, and if you’re really ready, you know what the key values in the business are and what the buyer is going to be attracted to.

So is it your brand, your technology, your IP? Is it the people, the customer relationships, the supplier relationships, or your route to market? What is it in the business that clients are going to be really attracted to, what is going to be the value?

“Then make sure you’re ready to present that in the most favourable light.” One of the big risks she says is that “your management team can get super distracted making the deal and take their eye off the day-to-day running of the business, which can then impact on earnings.

“So make sure your management team is still running the business, and you’re still continuing to hit your numbers and perform. You may need to free up capacity within the business to focus on the M&A transaction, which might mean bringing in some external help.”

Katharine Byrne, partner, corporate finance, BDO

Many companies underestimate the M&A process which can include unrealistic expectations on valuation and timescale, says Katharine Byrne, partner, corporate finance at BDO. She says poor preparation not only results in delays but can have significant impact on the value of the business for vendors.

Byrne says that to ensure a smooth transaction, it is important to engage good advisers and define what success looks like. This requires understanding at the outset the key objectives of all stakeholders from a personal, financial and business perspective.

“For acquirers, it is important to map out the acquisition rationale early in the process; while vendors need to understand the potential exit options available, ie, full or partial sale, maximise upfront or earnout consideration, continued involvement or quick exit.”

Preparation is key as is being realistic on outcomes, she continues. “Ensure you define clearly the key value drivers of the business and don’t try to hide any weaknesses but seek to mitigate them.” Additionally, efficient project management, flexibility and due diligence are also important.

“Finally, the success of all M&A is dependant upon what happens after the legal docs are signed; ie, the success of the integration or implementation plan.

“For trade buyers, the planning of the integration needs to start at the beginning of the discussions and it is important to ensure the key management are involved in preparing this integration plan. Similarly for private equity buyers, the implementation or rollout of the business plan is key to delivering the success of the business and overall private equity returns. In both cases, early planning and clear communication is key to the success post completion.”

Cathy Bryce, head of capital markets, AIB

The year 2021 was a strong one for M&A in Ireland and this trend is expected to continue in 2022, driven by strong business confidence and the availability of capital, says Cathy Bryce, head of capital markets, AIB.

“Private equity and strategic buyers will, we believe, continue to compete for quality Irish companies and the high level of interest from overseas players is also expected to continue. Healthcare, infrastructure and technology sectors were very active in 2021 and this trend is expected to continue this year.”

Finbarr Griffin, head of corporate advisory, Goodbody

“Despite a challenging macroeconomic backdrop, Ireland had a record-breaking number of M&A deals in 2021, higher than any other year on record with deal values at over $100 billion and transaction volumes up 58 per cent year-on-year,” says Finbarr Griffin, head of corporate advisory, Goodbody. “We expect this strong growth to continue in 2022, as both trade and private equity have significant volumes of capital to deploy.”

Each M&A transaction is unique, he says, but there are some considerations that can be applied across the board.

“From the seller’s perspective, generating competitive tension during an auction process can be critical to maximising value. Getting the sales pitch right and identifying the optimal buyer universe are vitally important.

“In addition, tackling any structural issues early on can be helpful in ensuring a smooth process, from both the buyer’s and the seller’s perspective. Ensuring appropriate management incentive arrangements post transaction is a key consideration. From a trade buyer’s perspective, having a clear integration plan in place can be the difference between success and failure, particularly as regards employee morale.”

John Bowe, corporate finance partner, Mazars

"The most important advice I would give any party considering a transaction is to prepare and not underestimate the time required to prepare," says John Bowe, corporate finance partner, Mazars.

“Given the sale of a private company is often the culmination of a lifetime’s work, and you can only sell your business once, preparation will give you the best chance of success.” He advises preparing a business plan to include three-year forecasts and details on growth drivers in the market, competitor analysis, and to identify what features of products or services will help achieve forecasts.

“Reduce over-reliance on a small number of customers. Client concentration is a significant risk for a buyer, so the greater the spread of customers, the better.”

Other key areas to focus on to ensure a smooth transaction include managing operations efficiently, managing succession through having a strong management team, identifying and securing key team members’ employment contracts that induces them to stay with the business post sale and ensuring contracts are in place with key customers and suppliers. In addition, ensure IP and trademarks are protected if essential for the business and minimise business risk.

“Buyers are always worried about hidden risks. Ensure the business is fully compliant with regulation, environmental, taxes and health and safety. Vendor due diligence is a sure way of flushing out issues in advice of a process.”

Brian McCloskey, partner, corporate M&A, Matheson

Completing an M&A transaction, whether buying or selling a business, requires significant investment, both from a financial and resourcing perspective, says Brian McCloskey, partner, corporate M&A, Matheson. "From an early stage both sides should identity their core deal teams, including external advisers, to avoid having the wider management team distracted from growing the core business whilst the M&A process is ongoing."

Agreeing valuation principles prior to committing material time and expense to due diligence can help avoid transactions breaking down later in the process as a result of each of the parties having different pricing expectations.

“As a buyer, you need to understand what financial, legal, operational or technology due diligence will be required to underpin your valuation. As a seller, facilitating due diligence by having a well-organised data and document management system will help prevent transaction delay and value erosion.”

Of particular relevance to sellers, it is important for any required pre-sale reorganisations – this may be necessary to ensure favourable capital gains tax treatment on a sale – to be planned and implemented prior to a transaction process commencing.

“To facilitate a smooth transition following completion, establish key milestones and incentivise people to achieve them. The long term value of an M&A transaction is typically made during integration, which should begin as soon as the target is identified.”

Alan Kelly, director, M&A, Focus Capital

“Selling or buying a business requires planning, strategy, preparation and teamwork,” says Alan Kelly, director, M&A, Focus Capital. “The key component of all of this is to follow a process.

“Selecting a team of advisers who understand what the client wants from the transaction is a vital step. A good adviser will give the seller objective advice rather than tell the vendor what they want to hear.”

He says a good adviser will also ensure that the client’s house is in order before the process starts. This will include a financial, legal, tax, compliance and operational review.

“It’s very important for a vendor to be able to clearly articulate why they want to sell their business and what they hope to achieve from the transaction. Is it to cash out, is it to partly cash out and sell a portion to a buyer who can inject fresh capital or is it to have an investor in the business who can provide help with strategic direction?”

No matter what the objectives and the motives are, it is important that the vendor understands what they have to sell, how valuable it is and why someone would want to buy into the business.

“It’s important that the vendor understands the growth opportunities in their market so that they can be clearly articulated to a potential buyer.”