The past year was an extremely busy one for Ireland's corporate finance and capital markets, as illustrated by the number of nominations for this year's 'Deals of the Year' awards.
Notable features of the corporate finance market in 2006 included the role of private equity firms in M&A transactions, and the continued flow of management buy-outs, including a number of very large ones, such as those by Davy and BWG.
Amongst the winners last year were the take private of the Jurys Doyle Hotel group, Treasury Holdings' CMBS deal and the Quinn Group's $300 million private placement.
This year, a new section has been introduced in the survey, to reflect the increasing role the private client section of the market is playing.
As per last year, awards, in a number of different categories, will be announced in next month's issue.
Corporate Finance
The largest deal of the year was Riverdeep's acquisition of Houghton Mifflin. In December 2006, Houghton Mifflin Riverdeep Group PLC, a new company created by Riverdeep's controlling shareholder Barry O'Callaghan, completed the acquisition of leading US educational publisher Houghton Mifflin from management and private equity investors, and Riverdeep, the Irish publisher of branded interactive educational and personal publishing products. This transaction, with a value of US$4.6 billion, was the largest ever acquisition by an Irish company and the second-largest transaction in Irish corporate history.
Edward Miller, a corporate partner with Matheson Ormbsy Prentice who led the team advising Houghton Mifflin Riverdeep Group PLC along with banking partner Libby Garvey, said, 'The transaction, which also incorporated a refinancing of the previously outstanding debt of Riverdeep Holdings and Houghton Mifflin, was funded by a combination of debt and private equity. The combination of Houghton Mifflin and Riverdeep brings together one of the most established and successful educational book publishers in the United States with the premier publisher of electronic courseware for the K-12 market in the United States. Houghton Mifflin and Riverdeep reported combined revenues and EBITDA of approximately US$1,425 million and US$392 million respectively, for the 12 months ended 30 September 2006'.
Another major deal of the year was the acquisition of the Eircom group by publicly quoted Australian investment company, Babcock & Brown. Brian O'Kelly, a managing director at Goodbody Corporate Finance, said that the transaction had a number of interesting characteristics. 'Notably it allowed the employee participation scheme through the ESOT to continue under the new ownership, while also providing an effective mechanism for ESOT members to realise gains on their existing holding over time. This was once again key to any deal being successful. In addition, because eircom's holding company had been re-registered in the UK during the 2003 refinancing, the timing of the takeover was such that it was the first company to come under the auspices of the new European Directive on Takeovers, which was implemented in the UK in May 2006'.
On the management buy-out side, the two major deals of the year were the acquisition of BWG Holdings Limited (BWG), by its team of executive directors, which was the largest management buy-out (MBO) deal in Ireland in 2006, and the €350 million purchase of Davy Stockbrokers from Bank of Ireland by Davy staff.
John Tuite, a director with Davy Corporate Finance, remarked of the BWG deal, 'The transaction marked the exit of BWG's former private equity owner, Cognetas LLP, which had led the original €220m buy-out from Pernod Ricard in 2002. Since the original buy-out, the company has strengthened its management team, grown its store portfolio and enhanced cash generation. The structure of the company has also been greatly simplified through a programme of disposal of non-core assets. The transaction was completed within a tight timeframe, following a decision by BWG's Board to examine its strategic options, due to effective management of the process on both sides. The deal represented a successful exit for Cognetas, bringing to an end what proved to be an excellent investment'.
The Davy deal marked the end of Bank of Ireland's involvement in the stockbroking sector. Des Carville, a director in Davy Corporate Finance said, 'The transaction was made somewhat more complex due to the involvement of approximately 100 management and staff in BidCo but this was an integral part of the commercial rationale for the buyout'.
Capital Markets
On the capital markets side, corporates again looked to private placements to meet their funding needs, while securitisation was flavour of the year amongst financial institutions. From an equities perspective, the year was also busy, and among the nominations are a number of corporates who listed on both AIM and the IEX - and of course probably the most high profile deal of the year, Aer Lingus' IPO and Ryanair's subsequent takeover attempt of the airline.
Following years of speculation regarding the public listing of the airline, Aer Lingus finally went public in early October. The airline achieved a market capitalisation of €1.2 billion, which was later increased following rival airline Ryanair's, as yet unsuccessful bid, for the company. Alan Doherty, managing director of AIB Corporate Finance, commented, 'convincing investors was only one half of the equation and there were numerous obstacles on the path to flotation. The resolution of a myriad of issues was critical to the success of the IPO. On 2nd October, Aer Lingus successfully entered the market capitalised at €1.16 billion, as the IPO, which had eluded many in the past became a reality'.
In other capital markets deals, securitisation was very prominent, with many of the major Irish financial institutions securitising mortgages during the year. These included Ulster Bank and EBS Building Society. Start Mortgages, the specialist mortgage lender, also brought two securitisation deals to the market in 2006, in both April and December. Barclays Capital was mandated to arrange and lead manage this ground breaking deal, which was the first non-conforming issue in Ireland.
Private placements were again popular amongst Irish corporates, with a number looking to raise finance in the US market. Irish semi-state Bord na Mona raised $150 million in June to raise long-term finance to support the roll-out of its aggressive strategic plan, which envisages significant change in the profile of its key energy, environmental and waste management businesses over the next five years.
Ulster Bank and RBS acted as sole arranger/agent for the private placement and co-ordinator of the related swap transactions to provide BNM with fixed rate euro. The transaction was significantly oversubscribed with a final book of demand at six times the amount the transaction was launched at. |
