Emerald Dreams Dashed: Soaring Costs and Inflation Plunge Irish M&A into Abyss

Decline in Irish M&A Activity Amidst Economic Challenges and Foreign Interest: Renatus Report Reveals 12% Drop
Emerald Dreams Dashed: Soaring Costs and Inflation Plunge Irish M&A into Abyss

Irish Merger and Acquisition Activity Declines by 12% in 2023

A year of economic challenges, including rising interest rates, inflation, and energy prices, has resulted in a significant decline in merger and acquisition (M&A) activity in Ireland. According to a report published by private equity firm Renatus, the number of completed deals in the first half of 2023 fell by 12% compared to the same period last year. While this decline is notable, the report highlights a positive outlook for the rest of the year, citing increasing business confidence and a growing appetite for acquisitions, particularly from international firms.

In the first six months of 2023, less than 200 deals were completed in Ireland, compared to 226 in the first half of 2022. However, Renatus notes that foreign multinationals continue to show interest in Irish firms, with 90 deals involving foreign acquisitions of Irish businesses. This number remains unchanged from the previous year. The report identifies several factors that contribute to the attractiveness of Irish firms, including access to EU markets post-Brexit, a strong presence of multinational companies alongside a robust SME sector, a highly skilled workforce, a favorable tax environment, and business-friendly support from organizations such as the IDA and Enterprise Ireland.

The financial services sector saw the most M&A activity, with consolidation occurring across various professional services throughout the country. Renatus also highlights the recurring theme of insurance broker consolidation, with private equity-backed insurance firms strategically acquiring small brokers to expand their businesses and gain a larger market share.

Additionally, market transactions accounted for 50 deals, with 34 involving an Irish company acquiring an international firm. Management buyouts and foreign private equity each accounted for 9 deals. The telecoms, tech services, and software sectors also experienced an increase in M&A activity. Interestingly, despite the challenges faced during the pandemic, companies in the software sector saw an increase in M&A activity, with the report noting attempts to leverage cloud and other new communication technologies to replace traditional non-digital systems.

Looking ahead, the report offers signs of optimism for the remainder of 2023. Globally, completed deals have increased by 23% compared to the first quarter, indicating a potential rebound in M&A activity. Despite the challenges faced in the first half of the year, rising business confidence and a growing appetite for acquisitions from international firms suggest a positive outlook for the Irish M&A landscape.