Fall in Irish deal activity was less than the global decline in M&A

Notwithstanding a robust Q1 in M&A activity in Ireland, deal value and volume fell substantially over the first six months of 2020. M&A in H1 2020 amounting to €2bn invested across 65 deals, representing falls of 26% in value and 29% in volume.

You can read the full findings in the mid-year William Fry Mergers & Acquisitions Review 2020, in association with Mergermarket, by clicking here or on the image of the report.

Key findings include:

• Deal volume fell from 75 to 65 deals in H1 2020
• Deal value decreased to €2bn from €2.5bn
• 89% of deals were mid-market (€5m-€250m)
• Inbound M&A value totalled €1.9bn or 95% of the total sum invested.
• 27 PE transactions, the highest half-yearly volume of the past seven years.
• Technology, Media and Telecom (TMT) accounted for 54% of value and 34% of volume.  

Stephen Keogh, Head of Corporate and M&A, stated: “For most markets 2020 is likely to represent one of the lowest, if not the lowest, watermarks in M&A since the global financial crisis more than a decade ago. A significant decline in Irish M&A activity was to be expected, yet these falls are far less than the global decline in M&A where deal value sunk by 53% over the same period, and volume dropped 49%, as investors worldwide adopted a highly risk-averse mindset”. 

Deal focus 

The mid-market (€5m-€250m) was once again the dominant segment in Ireland’s M&A landscape, claiming 89% of deals with disclosed value, but in contrast to most previous years, there were no large deals worth €500m or more. The largest deal of the period was the sale of Dublin semiconductor innovator Decawave to US-based Qorvo (advised by William Fry) for a reported €363m while the next largest was telco eircom’s €300m sale of tower assets, Emerald Tower, to Blackstone Group’s telecom infrastructure owner Phoenix Tower. 

Inbound activity 

Of the 65 deals announced in H1, 53 (82%) featured overseas buyers, who invested €1.9bn, or 95% of the total sum invested. This activity held up relatively robustly, in spite of the global quarantine period, with inbound deal volume falling by only 10% on H1 2019, whereas domestic volume fell by 59%. Ireland’s small indigenous economy and limited local M&A market makes it especially sensitive to recent border closures and newly risk-averse foreign investors. 

Private equity 

Private equity featured heavily in Ireland’s M&A market in H1, as financial sponsor activity held up incredibly well. In fact, the largest M&A deal to date in 2020 – the Qorvo/Decawave deal – represented an exit for a number of VC funds including Atlantic Bridge, Act Venture Capital, Enterprise Ireland and Kernel Capital. Overall, there were 27 PE transactions across H1, the highest half-yearly volume of the past seven years. This in spite of a 19% annual fall in deal value to €1.3bn. 

Sector watch 

Technology, Media and Telecom (TMT) was by far the most dominant sector, taking up 54% of value in total and 34% of volume. Three of the top five deals of H1 were in the TMT sector. The technology and telecoms sectors have performed exceptionally well so far in 2020 – enforced distancing measures showed how critical digital tools and infrastructure are for keeping businesses operating and supporting economic activity, as made further evident by the share prices of the likes of Zoom, Microsoft and Amazon, which have surged above pre-pandemic levels. 

Pharmaceuticals, medical & biotech (PMB) also plays to Ireland’s strengths as a base for a significant number of pharma firms. By value, PMB was the second-largest sector in H1 after TMT and recorded deal value of €613m, or 31% of total M&A value. Much of this was due to US based PE firm Blackstone’s €299m acquisition of Medtronic MiniMed, a manufacturer of diabetes management equipment, from medical technology firm Medtronic – the third-largest transaction of H1.  

One area to watch over the next 12-24 months is Renewables. The €35m sale of a 14.1MW wind farm in Letteragh to Greencoat Renewable – the largest domestic deal of the year so far across all sectors – could be a sign of what’s to come. With the Green Party now in government, and Ireland’s Environmental Protection Agency recently launching a €600,000 fund for Irish innovators to develop businessready solutions for the circular economy, further renewable energy deals and transactions with a green flavour more generally may follow. 

Outlook for H2 2020 

Looking at the rest of 2020, Stephen Keogh, concluded by saying: “There is reason to be cautiously optimistic that there may be a gradual rise in dealmaking in the second half of the year, including larger deals. The buoyancy of the M&A market will hang on the recovery of the global economy and on the government and health system’s ability to manage any potential local flare-ups of coronavirus. However, Ireland’s fundamentals, its historically strong economic growth combined with its technology and pharma expertise, are likely to remain a draw for investors not in spite of, but because of, the challenges of this particular economic and health crisis”. 

Read the full report here or click on the image below: