| Early stage acquisitions and MBOs to dominate in telecoms |
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| In which areas do you expect most M&A activity among Irish companies in the coming 12 months, by industry sector; by deal type; by value of deals? |
ABN AMRO
Note: ABN AMRO do not act in the private M&A advisory market in Ireland except in exceptional circumstances.
By industry sector: IT, telecommunications, financials: we are of the view that the growth in the IT sector in Ireland will continue in the next 12 months as indigenous high-tech companies seek further growth opportunities via acquisition in Europe and the US.
By deal type: acquisition, merger
By value: financial, telecoms. We believe that the Irish financial sector is ripe for consolidation given the poor sentiment towards the sector being currently shown by both domestic and overseas institutions. In addition the fact that Ulster Bank is now ‘off the blocks’ will require a major strategic rethink for the likes of ILP and BOI if they are to avoid becoming takeover targets themselves. The outcome of the sale of KPN’s 21% stake in Eircom should be a good indicator as to whether Eircom will also soon go into foreign ownership ala ESAT.
AIB Corporate Finance
By industry sector: Telecoms/Media, Financial Services, Technology
The Irish market has seen a high level of telecom/media activity in the past year and this is set to continue and increase in the coming year.
We would expect to see a significant degree of activity in the financial services sector this year and next. Apart from the possible activity around ICC, ACC and TSB we expect that many of the Irish financial services companies are likely to step up their efforts to grow overseas both in the off-line and on-line worlds.
We believe that at some point in the near or medium term (2000-2003), one or both of AIB and Bank of Ireland will come under the microscope of potential European acquirers; not to mention the smaller financial stocks which may be vulnerable.
Irish technology companies such as Iona, Baltimore and Trintech are developing scale and have attained high market valuations.
By deal type and value: acquisitions followed by MBO’s look set to be the most popular type of transaction. There has been a reasonable flow of MBO and leveraged transactions in 1999 (FEXCO/Global Refund, Jones Group offer) and from our pipeline we expect to see this continue in the coming year. There is also the strong possibility of public to private transactions given the low rating of second tier stocks in the market.
BDO Simpson Xavier Corporate Finance
By industry sector: Two sectors will dominate M&A activity: IT and telecommunications; Financial stocks
Our technology sector is becoming more mature with owner managers recognising the need to be positioned internationally. Acquisitions will play a key part in their overall strategy. We have already seen the likes of Baltimore Technologies establish a pre-eminent market position by an aggressive acquisitions policy.
The financial sector will see considerable consolidation over the next 18 months, not only with the state banks in play, but also First Active and building societies.
By deal type: The year 2000 has started off at a frenetic pace for early stage and development capital within the technology sector. The sale of Esat has further inspired many would-be entrepreneurs and existing businesses to set their visions at a higher level.
I also believe that MBO’s will show an increase, particularly in light of low multiples in the stock market. This will discourage plc’s from acquiring businesses which will result in more potential MBO’s as owners look for ways to exit from their business. Thirdly, I would see the need for mergers in traditional businesses in order for firms to compete internationally and to tackle the e-commerce area in a cost efficient manner.
By value: The technology sector - there will be many acquisitions and mergers in this area. I have never been as optimistic for the future of M&A activity as I am this year. The only issue I see is the capacity of experienced advisers being able to cope with the stresses and strains of so many deals!
CFI
By industry sector: IT, Print & Packaging, Telecoms
By deal type: Development capital - all VCc and indeed private and trade investors are keen to jump on the IT bandwagon. In previous years an IT company that was still in an R&D/developmental mode would have had little chance of attracting any institutional money, now it is being thrown at them. I see this trend continuing as investors are seeking to identify future stars reasonably early in their life cycle. This should not be confused with seed or early capital which is still difficult to source.
By value: There will be consolidation in the Financial sector, thus one or two deals will account for a large proportotion of the activity in ? terms. Expect a number of “.com”s to float on NASDAQ. However the bulk of the deals done will be deal sizes in the ?1 to ?5 million range.
Chapman Flood Mazars
By industry sector: the top three sector will most likely be IT/Telecommunications due to the level of interest currently in this sector and in the food and construction sectors due to the quality of the buyers and need for consolidation in these sectors.
By deal type: MBO/MBI should come through strongly due to the availability of funding this will be accompanied by a continued increase in the number of disposals and in the development capital being injected into technology deals.
By value: There should be at least one if not two substantial public to private transaction. There is always a chance that the financial sector could see consolidation to strengthen the third force in Irish banking or one of the major banks could be absorbed by one of their larger European cousins.
Davy Corporate Finance
By industry sector: Technology, telecoms, support services (outsourcing, recruitment, PR etc). There is a multitude of new tech companies now springing up in Ireland many of whom are growing quickly and have access to Stage 1 and Stage 2 financings which allow management teams to realise there ambitions. But it is also apparent that the multinationals are willing to fund early stage companies in return for strategic stakes which in some cases leads to outright control.
By deal type: Early development stage capital acquisitions; spin-off of subsidiaries with potential higher ratings than parent companies
By value: I don’t believe we will see one of the top 10 Irish companies being taken over during 2000. However there are several small/mid caps where the valuation gap between them and larger sectoral peers is now very wide. This does not automatically translate into increased corporate activity but there will be some.
Dolmen Corporate Finance
By industry sector: Financial institutions, services, technology
By deal type: Acquisitions, early stage, MBO
By value: Financial or technology, Eircom or a bank
Deloitte Corporate Finance
By sector: Technology companies, Telecoms/telecoms related companies, Financial services (banks, insurance companies).
We are also of the view that there will be a small number of larger value transactions in the food sector.
By deal type: Acquisition by international companies, Acquisition by Irish companies, Mergers of banks/financial institutions.
We also expect that there will be an increased number of non-VC companies taking minority stakes in early stage companies.
By value: Deals in the financial services area will by their nature be large. We expect there to be consolidation in the Insurance sector. We also anticipate there may be some activity involving ACC, TSB and ICC. In addition, should the poor share performance of AIB and BOI continue, there may be some international interest in acquiring one of these also.
We can expect an Irish technology company to be involved in a large transaction with an international buyer.
Ernst & Young
By sector: Software /e-commerce, Print & packaging, Financial services
By deal type: Acquisitions, 2nd stage financing, MBO’s.
By value: ?15m - ?50m range.
Goodbody Corporate Finance
By sector: Banking & Insurance; Technology; Industrial
By deal type: Acquisition; MBO; Early/development state capital.
Grant Thornton
By industry sector: Technology; Distribution; Retail
By deal type: Acquisition; MBO; Merger.
By value: Our M&A activity is primarily undertaken in the SME sector and we would envisage deals of ?5 to ?20 million in the more traditional business sectors. Technology deals on the other hand are less easy to predict. Non-IPO deals in this area will continue to rewrite the book.
IBI Corporate Finance
By industry sector: The Irish market is not deep enough for sectoral analysis to be very meaningful but, having said that, we anticipate strong levels of activity in the high tech sector. Distribution, food products and financial services may also be strong.
By deal type: The hallmark of the market is likely to be development capital for growing high tech companies. A continuing stream of private company disposals can also be anticipated.
By value of deals: mostly sub-?10m deals.
Merrion Capital
By industry sector: Banking/ insurance/financial services; Information technology; Building materials/construction
By type: Mergers; acquisitions; MBO/MBI
By value: Banking/insu-rance/financial services - ?5-10bn; Information Technology - ?1bn; Building materials/ construction - ?1bn
NCB Corporate Finance
By industry sector: Technology; financial services; and food/distribution.
By deal type: Development capital (private placements); Acquisitions; and mergers.
By deal value: Financial services; Technology; and Food/distribution. We expect to finally see consolidation beginning in the banking sector. We also expect to see more paper for paper M&A transactions in the technology sector and opportunities for private investors to invest in emerging technology prospects. There is still consolidation required in the food/distribution sectors.
PricewaterhouseCoopers
By industry sector: technology, financial services and logistics/distribution
By deal type: acquisitions, mergers and development stage financing
By value: financial services, retail and building materials.
“Traditional” businesses sectors will continue to consolidate resulting in some large scale transactions involving Irish companies, especially in the financial services, retail and building materials sectors. |
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| Article appeared in the March 2000 issue.
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