M&A activity in 2011 increased by 44% in value (from €9.9bn to €14.3bn), and 5% in volume (from 76 to 80 deals) compared to 2010.  This boost in M&A activity builds on the increase shown in 2010 from 2009 and is likely to continue through 2012 according to the William Fry M&A Review 2011 published today.

Disposal of Financial Services Assets Opportune for M&A

2011’s strong performance was largely driven by activity in the financial services sector, driven to a large extent by the banking crisis.  Almost one-third of the total deals (23 deals / 29% of the volume) accounted for over two-thirds of the value at €10.4bn (73%).  These included the 98% investment by the National Pensions Reserve Fund in AIB; the €2.3bn investment by the Irish Government in Irish Life & Permanent Group and the €1.1bn investment in Bank of Ireland by Fairfax Holdings, WL Ross & Co, Kennedy Wilson and others. As the banks continue to dispose of assets in 2012, it is expected that the financial services sector will continue to account for a majority of deals.

Ireland attracts overseas M&A investors

There was a notable dominance of foreign acquirers in 2011. US, Canada and Singapore based buyers appeared in six of the top 10 deals and over half of the overall number of deals (45 out of 80), highlighting the attractive opportunities available in Ireland. This also reinforces Ireland’s reputation as a European hub with a strong track record for developing innovative businesses offering further growth opportunities.  Unless derailed by uncertainty in the Eurozone, the influx of overseas buyers should help drive Ireland’s recovery in 2012 where businesses across the financial services, TMT and pharma, medical and biotech sectors continue to present opportunities for interested investors.

Reputation for Innovation proves important

The traditionally strong area of pharma, medical and biotech accounted for a total of 14% of deals, showing that Ireland’s reputation for innovation and opportunities in these businesses continues to be attractive for potential investors.  This sector is expected to remain strong in 2012 and, as the financial sector opportunities decline with the recovery of the banking sector in future years, pharma and TMT are likely to advance Ireland’s move towards a firm and sustainable recovery.

Private Equity continues to decline

2011 saw a continued decline in the level of private equity investment.  This decline reflects the difficulty in justifying high value buyouts and depressed valuations which lead to lower exit opportunities.

Bryan Bourke, Partner and head of Corporate and M&A at William Fry says that 2011’s figures build on a good performance in 2010 and show steady recovery since a low in 2009.  “Provided we can work through the eurozone crisis, this year should continue the positive trend in terms over overall activity, driven by the disposal of non-core bank assets and also strong performances in the pharma and TMT sectors.  A potential new area of interest in 2012 and into 2013 could be the opportunities that arise as a result of the Government’s actions under the NewEra programme under which it is reviewing its management of shareholdings in state owed entities and also the expected disposal of state assets such as Bord Gáis and Coilte, driven by pressure from the IMF, ECB and European Commission.”