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Fire sale of lenders' assets sparks spike in M&A activity

A MASSIVE fire sale of bank assets led to a surge in Irish mergers and acquisitions (M&A) activity in the second half of last year, according to research by Thomson Reuters.

The pick-up in deal flow throughout 2010 netted an estimated €170m in fees for investment banks, almost all of them abroad.

Companies and assets worth almost €20bn were bought or sold by Irish business last year, according to the research. It's the highest level since a record €22bn of M&A activity was announced in 2007.

Two-thirds of the 2010 deals by value were announced in the second half of the year.

The trend could be gathering pace, particularly with privatisation high on the agenda.

The data excludes all but the largest real estate deals.

According to Thomson Reuters, Irish M&A activity peaked in 2007 with 420 deals worth €22bn. Activity halved the following year and was down to €7bn by 2009.


Last year, however, activity surged again, particularly toward the end of the year.

Sales of assets that were aimed at fixing banks' broken balance sheets was the big driver of the pick-up in activity.

AIB's €4bn sale of Polish unit Bank Zachodni to Santander was the year's biggest deal.

It proved a huge money spinner for investment bankers, with Morgan Stanley and Deutsche Bank for AIB; and Nomura, Bank of America/Merrill Lynch and accountants KPMG for Santander, all sharing big fees on the deal.

The Thomson Reuters data shows UK investment bank Rothschild as the most prolific "rainmaker" in Ireland last year.

That was largely thanks to its role as adviser to NAMA on the transfer of billions of euro worth of impaired real estate loans from the main banks.

The NAMA deals hardly count as classic M&A activity, but even excluding those transfers, the activity in 2010 was worth more than twice the 2009 tally.

Rothschild also booked fees advising C&C on the sale of its spirits division to Scottish distillers William Grant & Sons.

The C&C deal was a rare example of inward investment through the M&A market.

Hindustan Zinc's acquisition of Lisheen Mine was another notable inward investment deal.

If fire sales were one trend, the other big contributor to activity was Irish businesses buying operations in less stressed markets abroad. Ardagh Glass's €1.7bn takeover of Impress Holdings and the acquisition of Germany's Bauking by CRH fit that bill.

Irish Independent