Recent credit events have not led to a quenching of appetite for Ireland’s corporate financiers, with a strong M&A deal flow in place for the rest of the year. While the top bulge bracket type deals have been hit, it is business as usual for those in the middle market, which is where most Irish deals would place.
Fergus McLoughlin, a director at NCB Corporate Finance, says that while recent events in theory should have affected banks’ appetite to lend, in practice it hasn’t.
He points to the recent ?160 million acquisition by Threefold Project Management of Eircom’s masts division, whereby multiples of EBITDA were raised, which is double and more the normal levels of debt that banks would offer. This indicates the level of appetite that is still out there.
McLoughlin says that NCB Corporate Finance is as busy as this time last year - if not busier - with no change in deal flow, although he adds that the business has a long lead time and that this might change over the coming six months.
Leo Casey, a director with IBI Corporate Finance, agrees with McLoughlin, saying that IBI has seen no deals being shelved or put back. However, he adds that the ‘feel good factor is gone’, and banks have become cautious, and more conservative and prudent in their lending decisions.
The environment may also impact on private client type deals as investors who have taken a hit on the equity markets may be less keen to take on more risk.
Casey also expects to see less heated auctions going forward, citing the recent example the sale of Today FM and 98 FM, which attracted multiple bidders. Moreover, we are more likely to see a greater proportion of deals by trade buyers, he says.
However, as corporates now have to pay more for credit, it is likely that they will demand a greater return on investment, which may lead to the more marginal deals being disregarded, in favour of the more compelling ones.
In mid-September, CRH announced its intention to purchase Mexican cement maker Cemex, in what would be one of the biggest ever deals in Irish corporate history and the largest so far this year.
However, against a background on-going credit concerns, news of the deal has led rating agency Moody’s to put the corporate’s backed senior unsecured debt ratings on review for a possible downgrade, potentially impacting $3.75 billion of long term debt securities. |
