M&A activity shows decline

MERGER and acquisition activity has fallen to levels last seen in the mid-1990s, following what has been described as an extremely difficult year.

There were 140 transactions last year compared with 276 in 2008 and 287 in 2007, according to Mazars. This represents a fall of 49% on 2008 and a fall of 51% from the peak of 2007.

Corporate finance partner at Mazars, Enda Gunnell said the deal volume was consistently low throughout the year and transactions took place at multiples far lower than their peak of a couple of years ago.

“A painful transition is taking place but there are signs that confidence is beginning to reappear which we believe will lead to more transactions in 2010,” he said.

During 2009 there was an average of 35 deals per quarter, significantly lower than the 59 deals transacted per quarter during the second half of 2008.

Mazars said there was an absence in the second year of large deals, which are valued at over €250m. Last year just three such transactions were recorded with an aggregate value of €1.6bn compared with five deals valued at €3.2bn in 2008.

The largest single transaction in 2009 was the €630m acquisition by Johnson & Johnson of an 18% stake in Elan.

The most active sectors were waste energy and natural resources and food drink and agriculture. The construction and property sector saw deal numbers fall from 71 in 2008 to 19 in 2009.

Also the number of transactions completed in 2009 by major Irish corporates was reduced significantly. CRH, who have been the most active Irish corporate with regard to acquisitions over the last number of years completed €450m worth of acquisitions in 2009 which was down from €1.5bn in 2008 and €2.2bn in 2007.

Mr Gunnell said: “There were a number of reasons why the volume and value of transactions decreased so significantly during 2009. One of the principle reasons was that the recession deepened during 2009 and big questions were raised over the strength of business fundamentals which led to a serious lack of confidence in many businesses.

“Consumer confidence also hit rock bottom during this period. The outlook of companies changed and they focused more on operational efficiency and delivery than on development activity.”

Meanwhile the number of merger transactions notified to the Competition Authority fell again in 2009, with notifications – generally required only for larger transactions involving companies with turnover of at least €40m – down 30% on the previous year, according to a review of Irish merger control activity by law firm McCann FitzGerald.