Increased takeover pressure from private equity funds

INCREASED takeover competition from venture capital and private equity groups is making it harder for Irish groups to expand.

And according to a top Irish banker that situation is unlikely to ease up anytime soon.

Kerry Group spent six months recently on a deal that fell through because an international equity fund had deeper pockets.

Equity funds are becoming bigger players in the global business market where with modest equity they can raise six or seven times the amount to push through significant acquisitions.

That situation is unlikely to change in the near future warned Bank of Ireland Corporate Banking chief executive Richie Boucher.

In the past, private equity funds have been prepared to back companies at higher valuations than the market and have been right in their assessments.

C&C was a case in point, where an equity fund took a majority stake in the business before it was floated at a better price than was generally expected.

Given the state of the acquisitions market, Bank of Ireland’s corporate division is intent on doubling its domestic business over five years and has increased staff by 100 to 375 to achieve that target.

Apart from Ireland, Europe, Britain and the US are in the corporate division’s sights, said Mr Boucher.

The bank has an office in Paris and another is planned for a second European capital in the coming months.

In London the group has a staff of 70, where they see significant opportunities.

By the bank’s financial year end in March 2005, the corporate division had €14 billion in loans. This year, Mr Boucher expects the figure to be significantly higher.

Outlining future strategy, the bank says it has plans to double its business over the next five years, along with continued overseas expansion in its target markets.

In Britain, which the bank believes is still growing solidy, it was joint deal arranger with Royal Bank of Scotland on the new stadium for the Arsenal football club for which $260 million (€212m) was raised through a consortium of banks.

At the end of the last financial year, corporate lending accounted for 15% of profits, said Mr Boucher.