Mergers and acquisitions down 45% to €1.6bn

THE value of mergers and acquisitions involving Irish companies fell 45% to €1.6 billion in the second quarter of this year compared with the previous quarter.

The value of deals is also 25% lower than the same quarter last year, according to the latest NCB merger and acquisition (M&A) survey.

NCB corporate finance director Jonathan Simmons said we are likely to see a continuation of downward pressure on valuation multiples, reduced leverage multiples and a more cautious approach to debt funding by banks.

According to the survey, there were 51 deals in the second quarter of this year compared with 54 in the first quarter.

The survey notes however that the second quarter figures are distorted downwards by the absence of a billion euro deal like the Scottish & Southern Energy/Airtricity deal in the first quarter. When this deal is excluded, the value of deals was just 12% lower than the first quarter.

Mr Simmons said: “Lower deal multiples and the strength of the euro against the dollar and sterling means that US and UK assets will remain attractively priced for Irish buyers.

“The second quarter figures reflect the current state of M&A activity where valuations have come back but activity levels are holding up, particularly in the market for mid-sized deals.

“We are also likely to see trade buyers with strong balance sheets becoming increasingly active,” he said.

Mr Simmons said there is still healthy demand for good businesses, and quality buyers with a good track record can still access funding. Deal volumes in the mid-sized market also remain strong.

“That said, the market will remain challenging compared to previous years, but activity will remain healthy albeit with lower deal valuations,” he said.

The biggest deal of the second quarter was the IAWS’ €457 million takeover of Swiss firm Hiestand.

This is the first time the M&A survey has been produced by NCB Corporate Finance, following a decision by Ion Equity to transfer production of the survey to NCB from the second quarter of this year.

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