| Corporate finance update: strong level of growth in market, with deals worth €4bn transacted |
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| The mergers and acquisitions climate in Ireland remains buoyant with a number of high profile transactions already successfully concluded in 2005. Recent data indicates €4 billion of disclosed transactions for the first three months of the year, writes Mon O’Driscoll in this review of the sector. |
There are a number of principal drivers generating the current levels of M&A activity being  | | Mon O'Driscoll, managing director of AIB Corporate Finance |
undertaken by Irish companies. These drivers include:
• Private and institutional investors seeking to expand their investment portfolios.
• Irish companies seeking to develop business in new geographical territories;
• Consolidation within certain sectors e.g. building materials, waste and regional media;
The largest deal completed in the first few months of 2005 was the purchase by Waren Acquisition of Warner Chilcott, the Northern Irish pharmaceutical group focused on women’s healthcare and dermatology for €2.3 billion. The second largest transaction was the announcement by Select Retail Holdings to acquire Superquinn from Feargal Quinn and family. Select Retail Holdings is owned by a group of Irish private investors and lead by Simon Burke, formerly the chief executive of Hamley’s. AIB Corporate Finance is currently advising the Quinn family on this transaction.
Overall Irish private investors have been very active in acquiring trading assets over the last year. Of the many transactions, one of the more notable Irish acquisitions was the Shelbourne Hotel on St Stephen’s Green for €160 million, which was backed by some of the investors in Select Retail Holdings. The largest of these transactions was the acquisition by Quinlan Private, on behalf of private investors, of the London Savoy Group (i.e. Savoy, Claridges, Berkeley and Connaught hotels.). The Savoy Hotel itself was subsequently sold, reportedly generating a STG ?30m profit for investors.
In early May 2005, the Precinct Consortium, who were behind last years recommended offer for Gresham Group, announced they had made a preliminary approach for Jurys Doyle Hotel Group plc with market sources estimating a possible value of €1 billion for the company. The full-service hotel sector generates relatively low returns on capital and hotel companies are constantly looking at ways of improving returns. Sector analysts point towards the latest trends for improving returns such as sale and leaseback or sale and manage-back agreements. Whether or not the board of Jury’s believe the approach is a viable option remains to be seen.
CRH and Kerry Group are excellent examples of companies looking to increase their presence in foreign territories and new product markets. CRH for example disclosed in January, that it had made 25 strategic investments, including acquisitions totalling €309 million, during the second half of 2004. CRH and Kerry Group continue their strategy to undertake bolt on acquisitions during 2005 principally in countries outside of Ireland, reflective of their 2004 strategy. Glanbia was another acquisitive company on the international front in late 2004 when it announced its first acquisition for a number of years of German based nutrient delivery systems company, Kortus Food Ingredients Services GmbH. In February 2005, Glanbia turned their focus back to Ireland and struck a deal to take control of the CMP liquid milk, cream and juice branded business from Dairygold for €10 million.
Consolidation, particularly in the Irish construction and building materials sector remains a key theme for 2005. Prominent 2004 transactions include the acquisition by Grafton Group plc of Heiton Group plc for €353 million and the sale of Brooks Group to Wolseley plc for €180m. Activity in this sector continued into 2005 with announcement in March by Kingspan plc of the acquisition of Century Homes, headquartered in Monaghan, for an amount of up to €98m. Gerry McCaughey and his family have developed Century Homes from its foundation in the early 1990s into the leading timber frame house manufacturer in Europe. Century Homes is one of the great success stories of the boom in Irish construction sector during the last ten years with timber frame houses now accounting for almost 25 per cent of all house completions in Ireland compared to less than 3 per cent 15 years ago.
AIBCF believe that during the remainder of 2005 a number of other transactions will be announced in the construction and building materials sector with particular focus on tool & plant hire, concrete products and offsite construction companies. Other likely transactions may include the acquisition by leading national players of family owned companies as companies address the issue of family and management succession.
The pressure on independents from larger national competitors as well as new international entrants to the market, leads to an increased level of competition, which by implication will result in the re-organisation and sale of a large number of family owned businesses over the coming years.
It looks likely that 2005 will again be a very successful year for the corporate finance community. Ireland’s
economic growth, low interest rates and healthy corporate activity, gives cause for optimism for the coming year. |
Mon O’Driscoll is managing director of AIB Corporate Finance.
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| Article appeared in the May 2005 issue.
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