IRISH mergers and acquisitions (M&A) exploded in 2021 helped by pent-up deals from the previous year’s lockdown and vendor-enticing valuations boosted by cheap debt.
Data from Refinitiv (formerly Thomson Reuters Finance & Risk), prepared for the Irish Independent, shows the value of deals with an Irish involvement increased by close to five times in 2021 from the previous year but was also well up on the pre-lockdowns and pre-pandemic levels of corporate activity in 2019 and 2018.
The 682 deals struck in 2021 looks to have been an all-time high.
Dublin law firm A&L Goodbody acted on more valuable deals than any rival solicitors or indeed than any single financial advisor (see tables).
Head of M&A at A&L Goodbody Richie Grey said 2021 was a “perfect storm” from a vendor perspective with the availability of debt-boosting valuations and well capitalised strategic buyers consolidating across a range of sectors.
Mr Grey said most activity in 2021 was in the €25m to €50m range – large deals by domestic standards. Consolidation in insurance broking and engineering firms was a particular feature. Buyers across sectors were a mix of corporates and private equity.
“Five years ago there would have been more nervousness on the vendor side looking at an approach from private equity. It’s something founders and owners are more familiar with and more comfortable with now,” Mr Grey said.
Even if they do not land deals, Irish and UK private equity firms are active in every sale process, helping boost valuations and giving owners an option to sell most of their equity but remain with their business as an alternative to an outright sale, he said.
The classic leveraged buyout was less a feature at the top of the market, but did include Clayton, Dubilier & Rice’s take-private of UDG Healthcare in a deal worth almost €4bn after the US bidder was forced to raise its offer to meet the expectations of shareholders. A&L Goodbody advised UDG on the deal, alongside international firms Freshfields and White & Case. Arthur Cox and William Fry acted for the buyers, again alongside London firms.
A&L Goodbody also acted on the biggest deal of the year, GE’s €26bn sale of its Shannon-headquartered aircraft leasing arm to AerCap, as sole Irish advisor to the seller along with five international law firms and three global investment banks. McCann Fitzgerald advised Aer Cap, again the only Irish firm on that side of the deal.
Other big deals included the expansion of the three domestic banks through the carve-ups of Ulster Bank and KBC Ireland and mopping up of Davy and Goodbody Stockbrokers.
Reshaping of Kerry Group under Edmond Scanlon generated important deals including the near €1bn sale of Kerry’s consumer arm to Pilgrims Pride, with Glanbia following suit.
Despite the best efforts of Covid to batter corporate balance sheets, distressed sales were not a big feature in 2021. The debt restructuring of Nordic Aviation Capital was an exception. Borrowers, advised by Houlihan Lokey, gained control of the business and favoured a US Chapter 11 over an Irish examinership to formalise the deal.
Distress may prove more of a feature as lenders’ capacity for Covid forbearance is exhausted, possibly by late this year.
Potential speed bumps to deal-making include an expected rise in borrowing costs, but for now Mr Grey said buyers lining up for assets remain confident in their funding, including access to syndicated loans.
Ireland is also due to adopt the EU’s new framework for screening foreign direct investment (FDI), a regulatory move aimed at curbing unfair competition from state-backed non-EU buyers, including from China, and at keeping sensitive technology or assets out of foreign government ownership.
Mr Grey said he expects the Irish Government to move on the issue in the first half of the year but anticipates a relatively hands-off approach that will not significantly delay M&A completions.