Wednesday 28 June 2017

Brexit fears leave top bosses split on M&A activity in 2017

Patrick Coveney, head of Greencore. Photo: Jason Clarke
Patrick Coveney, head of Greencore. Photo: Jason Clarke

Sean Duffy

Almost half of Irish business leaders (45pc) are forecasting a drop-off in merger and acquisition (M&A) activity this year as a direct result of Britain's decision to leave the EU.

Just under a third (30pc) of respondents to the survey - carried out by financial advisory firm KPMG - said they didn't foresee a change in the M&A environment, while 17pc said there would be an increase in activity due to the relocation of financial firms from the UK. Nine per cent stated that currency fluctuations would result in an increase in Irish M&As.

Just 12pc of business leaders here believed there would be a reduction in deal activity as a result of Donald Trump's election as US president. Mr Trump has made a point of targeting US firms based abroad with further concerns that a reduction in US corporation tax rates could be detrimental to Ireland's hopes of luring and keeping multinationals in the country.

Greencore, the highly profitable food group led by Patrick Coveney, says that the arrival of the Trump administration may in fact be a boon for the company as it looks to boost its presence in the US.

"Over time, we will continue to target the US for further investment opportunities. There is good positive momentum in the US economy and early indicators suggest that the new administration will be business and deal-friendly," said Greencore chief financial officer Eoin Tonge.

More than a fifth of respondents (22pc) said they expected to see a fall in deal activity as a result of general uncertainty. However, an identical number said the opposite, forecasting a rise in the number of investments undertaken as a result of sectoral improvements.

However, 42pc said that they did not see US policy having an impact on M&As here.

Consolidation with other Irish firms is viewed as the most attractive proposition for investors in Ireland, with 27pc expecting deals to be done internally.

Almost a quarter (24pc) said they believed the UK was the most likely destination for Irish investors seeking acquisition targets. Europe was seen as the most likely destination by 20pc, while 18pc said they saw Irish firms heading to the US and Canada to find new assets.

Just 11pc thought Irish firms would explore emerging markets for acquisitions.

One fifth of bosses believed that the technology sector would be the most popular sector for M&A activity, while 20pc believed that agribusiness and food firms were most likely to consolidate.

In what may be a harbinger for things to come, it was announced earlier this week that two Irish mushroom firms - Walsh Mushrooms and Golden Mushrooms - were to merge. The mushroom industry has been hit particularly hard since the Brexit vote, with a drop in the value of sterling causing some companies to go out of business.

17pc of corporate bosses believed that most mergers would come in the pharmaceutical and healthcare sectors, while 15pc said amalgamations were most likely in the construction sector.

Investor confidence was considered the most important macro economic factor that would influence deals in the year ahead.

The continued improvement on financial markets was rated as the most likely determinant by 16pc of company leaders,followed by the valuations on available companies.

Irish Independent

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