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Saturday, 20th April 2024 |
| Increased caution amongst Irish management reflects uncertain global markets |
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| Respondents’ replies to the question: ‘How would you characterise Irish management's attitude to risk in relation to corporate finance deals at present (from 'over cautious' to 'too risk seeking')?’ |
ABN AMRO
In general, Irish management’s risk attitude is risk comfortable.
AIB Corporate Finance
Attitude to risk varies from company to company and from industry to industry. However, given the volatility we are experiencing in equity markets and the related concerns about the world economy there is a tangible element of caution in most Irish corporates at present.
BDO Simpson Xavier
Over cautious - most companies are too cautious in their approach to acquisitions. There have been some notable exceptions such as with Qualceram Shires and the Greencore/Hazlewood deals, both of which stand out as aggressive deals giving the companies significant market presence in high growth sectors.
More Irish companies and entrepreneurs should be prepared to go for the larger deals which can bring better market position and better management, rather than a series of smaller acquisitions which can present more problems in integration and lack of management.
Davy Stockbrokers
I don’t think its possible to generalise. However Irish management teams by nature tend to be cautious but can be tempted into aggressive deals where there is compelling industrial and financial logic. Kerry Group has built its business overseas on the back of some large leveraged deals relative to its balance sheet. This has worked well for Kerry.
Goodbody Stockbrokers
In our experience. with the exception of one or two of the more ‘traditional’ stocks, Irish managers have a risk comfortable attitude towards domestic and internationals acquisitions and towards the pursuit of acquisition led growth.
ICC Bank
Irish management tends to be risk averse in many cases, but it can vary in different companies. It is challenging to progress acquisitions, integrate them successfully, and structure the negotiations to yield attractive returns post-deal for shareholders. This requires skills and an ability to understand the financial dynamics at work. Acquisitions provide a way to achieve the growth aspirations of institutional investors, but they must be based on solid commercial tenets and astute negotiations to yield subsequent returns. Key skills in the current climate are contained in the negotiations matrix, balancing how risks and rewards are traded-off and negotiated as part of the transaction.
KPMG
I think that Irish management are risk comfortable at present. Most acquisitions by Irish companies are made in Ireland and the UK, where the economies are still growing. While the slowdown in the US is expected to have an impact on growth in both these economies, business confidence, a key factor in determining the level of M&A activity and management’s attitude to risk, is still relatively high in Ireland and the UK. The expected fall in interest rates in Europe and the UK in the next quarter is also expected to help to offset any negative sentiment from the US slowdown.
NCB Stockbrokers
We would characterise Irish managements’ attitude to risk as being somewhere between ‘risk comfortable’ and ‘cautious’ at present. We are beginning to see evidence of greater prudence, which we would attribute to the general slowdown globally.
As always, we find that Irish management understand their sector well and do the requisite ‘homework’ to minimize the exposures inherent in all M&A transactions.’
PWC
I would regard Irish management as continuing to take a cautious stance in terms of M&A strategy, deal-pricing and financing. A consequence of this approach has been the good track record of Irish corporates in creating value for shareholders through M&A activity. |
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| Article appeared in the April 2001 issue.
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