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Thursday, 13th August 2020
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Top deals of the past 15 years Back  
Bryan Evans looks at the differences between the top deals of 1987 and 2002 and says that the growth in corporate finance activity has led to the development of an advisory infrastructure in Dublin, which equals or surpasses that of most international financial centres.
Late in 1986, Waterford Glass acquired Wedgewood plc for £334 million. Last year, Valentia acquired Eircom for e3 billion. As I write, the market is anticipating a private equity offer to buyout Smurfit Group for an estimated e3.5 billion. M&A activity in Ireland is now of a scale, in terms of volume and value, unimagined when Finance was launched in 1987.
The past fifteen years have been exciting and, largely, successful years for acquisitive Irish businesses. Companies such as CRH, Kerry, Smurfit, Glen Dimplex, DCC and Independent News & Media have leveraged strong domestic positions to build large-scale international businesses through well-executed acquisition programmes. Other Irish companies have focused on consolidation in the home market. Glanbia represents the consolidation to two of the country‚€ôs largest food groups - Avonmore and Waterford. Irish Life & Permanent has led to consolidation and its recent acquisition of TSB Bank. The merger of Ireland‚€ôs two largest hotel groups in 1998 has provided Jurys Doyle with a strong domestic platform to support expansion in the UK and US.
Whilst the stock market has provided enthusiastic support for those acquisitive companies with a coherent expansion strategy, the share price performance of many other Irish companies has disappointed investors. As a result, a number of Irish plcs have been taken private in recent years in deals financed by private equity houses and leveraged acquisition finance. Examples include Clondalkin, Adare and Eircom and more are likely in the future.
Private equity houses have also been an important source of finance for privately owned businesses, particularly in the technology sector, and for the buyout of old economy businesses such as Cantrell & Cochrane. Indeed, for an economy of its size, Irish businesses now have available an unusually large supply of private equity investment from local funds, overseas private equity houses and high net worth individuals.
Fifteen years ago, M&A activity was dominated by public companies, with only a very small flow of privately owned businesses coming on the market. This reflected a lack of scale in Irish businesses and a tendency for ownership to be retained within families through the generations. In recent years, Irish businesses have grown in scale and profitability and owners have overcome their reluctance to exit, taking advantage of high valuations and a low rate of capital gains tax.
The high level of corporate activity, particularly in the last five years, has underpinned the development of a strong indigenous corporate finance advisory sector. Fifteen years ago, the sector was dominated by a very small number of local investment banks. Today, these are joined by stockbrokers and the corporate finance arms of the leading accounting firms. Additionally, there a number of boutique firms with a sectoral or SME focus. As a result, the advisory infrastructure in Dublin equals or surpasses that of most international financial centres.
My own firm, PwC Corporate Finance, provides a good illustration of the changes, which have taken place over the last fifteen years. In 1987, I had recently established the Corporate Finance practice of Craig Gardner with a staff of two. Today, the successor firm of PwC Corporate Finance employs 25 professionals and provides business strategy as well as corporate finance advice. In recent years, we have established PwC as a leading corporate finance house, acting as financial advisors on some of the largest indigenous deals including the sale of Doyle Hotels to Jurys (E323m) and the sale of TSB Bank to Irish Life & Permanent (E430m).

What‚€ôs ahead for the future?
Whilst economic growth has slowed over the last 12 months, the medium term outlook remains positive. Corporate deal activity is likely to remain high as the search for enhanced shareholder value continues. Much of the M&A activity of Irish corporates will be overseas. Private equity houses will continue to search for undervalued assets and this is likely to lead to some more de-listings from the Irish Stock Exchange. Now that the new Government is in place we should see progress on the privatisation of State assets over the next few years. Also, as pressure mounts on the public finances, we can expect more urgency in the efforts to put in place public private partnerships to develop national infrastructure.
The market for corporate finance advisory services will remain competitive. The most successful players will be those with strategic insights, who can originate deals and execute effectively at local and international level. Genuine industry knowledge will become increasingly important, not only in technology and telecommuniciations but also across a range of sectors, if advisers are to add value for increasingly sophisticated clients. Our strategy at PwC Corporate Finance is to combine strong local strategic and execution skills with a global network of sectorally organised corporate financiers to ensure our clients can be effectively supported at home and on a cross border basis.

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