The big and the bold in the world of M&As

Possibly the most important merger of 2016 from the perspective of market impact was the one that didn't happen. The proposed $160 billion (€150 billion) merger between Pfizer and Allergan would have been the world's biggest M&A deal of 2016 by far, but it was scrapped at the last minute following a change in American tax law.

The change was aimed at preventing so-called “inversions” where companies shift domicile to avoid local tax bills. In this case, the inversion would have allowed Pfizer to save an estimated $1 billion (€0.9 billion) in taxes by moving its headquarters in Ireland. The blocking of that deal effectively signalled an end to the quite massive inversion transactions which had been a major feature of the landscape in recent years.

Another highly significant deal with an Irish dimension during 2016 was the $16.6 billion (€15.6 billion) acquisition of Tyco International by Johnson Controls. This was among the last of the inversions and saw Johnson Controls cutting its tax bill by some $150 million (€141 billion) a year by merging with Tyco, which already had its headquarters in Ireland.

A transaction which could have profound implications for Ireland in the long term was one the $26 billion (€24.4 billion) acquisition of LinkedIn by Microsoft, both of which have a significant presence here. LinkedIn was being courted by up to half a dozen suitors but chose to make the deal with Microsoft not just because of the money on offer, but also because of the good fit between LinkedIn's increasingly powerful networking and customer relationship management capabilities and Microsoft's power in the cloud.

The biggest deal of the year globally, the $86 billion (€81 billion) merger between AT&T and Time Warner, has yet to be approved by the US authorities. The deal will bring Time Warner's content, which includes CNN, HBO, TBS, TNT, truTV, Turner Classic Movies, NBA TV, Cartoon Network and the the Warner Bros film studio, to AT&T's cable, satellite and streaming TV services.

It may fall foul of Donald Trump, however, who, as well as repeatedly singling out CNN for criticism during and after his presidential election campaign, argued against the deal as long ago as October. “As an example of the power structure I’m fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few,” he said at the time.

Ireland wasn't short of its own significant deals during the year, of course. Most recent of these was the €751 million acquisition of Fyffes by Tokyo-based Sumitomo. The deal brings together the largest banana distributors in Europe and Asia and saw each Fyffes shareholder receiving €2.23 per ordinary share. "Fyffes were actually looking to do a deal themselves earlier in the year but when this didn't go through, the company moved from being a potential acquirer to being a target for acquisition," says KPMG head of corporate finance Michele Connolly.

“The deal represented an exceptional outcome for shareholders,” adds KPMG head of transaction services Mark Collins.

"The $2.2 billion [€2.1 billion] acquisition of Fleetmatics by Verizon certainly put the global spotlight on Irish tech, which was further supported by the sale of Movidius and Britebill, transactions that provided a strong return for Irish venture capital funds," adds BDO corporate finance partner Katharine Byrne.

Dublin-based Movidius was acquired by Intel in a deal reported to be worth €355 million in September. Movidius makes computer vision hardware which has applications in drone and camera technology, and lists Google and Lenovo among its customers. It is believed that the deal was motivated by Intel's desire to integrate Movidius's technology into its RealSense platform, which is being built into augmented-reality headsets, webcams and drones.

Also in September, Brite:Bill, which develops advanced billing software, was sold to Israeli firm AmDocs for €230 million.

Byrne also points to the €820 million sale of Galway-based medical device manufacturer Creganna to TE Connectivity at the start of the year. The company was founded in Galway in 1979 by Ian Quinn and was sold to UD private equity firm Permira in 2010 for a reported €223 million. Since then it increased revenues from €100 million to almost €200 million.

"This demonstrated how ambitious Irish companies can become significant global players through strategic M&A," she says. "With an increasing number of international buyers in the market, 2016 saw some large transactions with Asian buyers including the Fyffes deal and China General Nuclear Power Corp's [CNG)]acquisition of Gaelectric wind farms."

Another ambitious Irish company formed one half of possibly the most important single deal of the year which was approved last January. The merger between Paddy Power and Betfair created a global gambling giant with customers in 100 countries, €2 billion in revenue and a combined value of €9.4 billion.

Following the announcement of the merger, then Paddy Power chairman Gary McGann said: “The merger of Paddy Power and Betfair will create a company of world-class capability and people who will deliver substantial up-front synergies and a platform for very exciting business expansion.”

“This was another exceptional deal involving an Irish company during the past year,” Collins says.

Other notable Irish deals during the year included the sale of AA Ireland to private equity fund Carlyle Cardinal Ireland Fund and Carlyle Global Financial Services Partners for €156 million, the sale of a minority stake in Ion Investment Group to Carlyle Group for €400 million and the sale of the Paddy Irish Whiskey brand by Irish Distillers to the US family-owned drinks company Sazerac for €90 million.

Mega deals keep aircraft leasing flying high

Irish-based aircraft leasing firm Avolon was catapulted into the industry’s top three globally following its acquisition of the aircraft-leasing business of CIT Group for $10 billion (€9.4 billion) last October. This followed hard on the heels of Avolon itself being sold for $7.6 billion (€7.1 billion) to Bohai Leasing of China in November of 2015.

“Aircraft leasing is one area where Ireland dominates internationally,” says KPMG corporate finance head Michele Connolly. “This is an example of a home-grown Irish business taken over by a Chinese firm and then went on to buy the aircraft leasing business of CIT. Avolon is now number three in the world in that space behind Aercap and Gecas. Some of the deals in this sector have been very bold and ambitious and have really put Ireland on the map.”

Aercap was itself involved in a mega-deal in 2014 with it purchased International Lease Finance Corp (ILFC) from AIG for $7.6 billion, creating the world's largest independent jet-leasing firm in the process. For its part, Gecas, the aircraft leasing unit of GE, acquired Dublin-based helicopter lessor Milestone Aviation Group for $1.775 billion (€1.665 billion) in 2015.