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Tuesday, 16th April 2024
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Irish M&A slumps to E1.5 billion in quarter one Back  
M&A transactions in Ireland have fallen sharply in the first quarter of 2001, and industry expectations are that deals are continuing to run at reduced levels during the current quarter.
By Roisin Hogge

M&A transactions in Ireland have fallen sharply in the first quarter of 2001, and industry expectations are that deals are continuing to run at reduced levels during the current quarter.

Figures released by KPMG show that the value of M&A deals in the first quarter of 2001 has dropped significantly on the first quarter of 2000.

KPMG estimates that Irish M&A activity topped E1.5 billion in the first quarter of 2001, based on the reported value of deals. However this does not take into consideration a further 10 deals where values of the transaction was not disclosed.

This compares with an estimated E7.6 billion - the reported value of deals done during the first quarter of 2000. While this includes the Esat and Ocean deals with British Telecom for E2.4 billion and E533.4 million respectively, it is apparent that even without these that Irish M&A activity has slumped during the first quarter of 2001.

Anecdotal evidence suggests that all deals previously announced, are either on hold for the moment or have been withdrawn until better market conditions resume. The Irish evidence echoes the international slowdown.

This month’s Finance magazine M&A survey shows that corporate advisors have seen a change in the market and are predicting that old economy trade sales will be the dominant feature of a more muted market during the remainder of 2001. This compares with the trend for early stage acquisitions and management buyouts seen in the Finance survey last year.

Reflecting last year’s strong market in M&A, survey respondents reported an increase in their ‘guesstimates’ of the price/earnings ratio for private non technology Irish company acquisitions. Valuations rose from an estimated consensus of 9 times earnings last year to an estimated consensus from respondents of 10.5 this year.

However respondents still see the IT and telecommunication sectors as being active this year despite the international collapse in valuations. The Irish financial services sector too is touted for action in the coming 12 months.

In terms of funding sources, debt finance from banks is almost unanimously back on top following the trend last year for funding from corporate and private investors last year.

International interest in the Irish M&A acquisitions is still buoyant despite the international slowdown and the appearance of the bear market - one respondent estimated that over 90 per cent of all Irish M&A deals involve a foreign acquirer. This activity is set to continue also. The advent of the bear market will see the drivers for M&A changing to a more defensive stance, with the emphasis being on restructuring, respondents say.

According to Hugh McCutcheon, managing director of ABN AMRO Corporate Finance ‘many smaller and middle cap Irish stocks are undervalued. With fund managers increasingly moving away from those stocks, they represent good value for potential acquirers and management may seek to take the companies private if earnings performance is not recognised in the share price.’

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