William Fry’s latest mergers and acquisitions report shows that telecoms and pharma were among the top performing sectors in the first half of 2020.
Despite a robust first quarter, merger and acquisition (M&A) activity in Ireland has fallen in the past few months due to Covid-19.
According to a new report from William Fry, there was a significant decrease in deal value and volume in the first six months of the year compared with 2019. A total of €2bn was invested across 65 deals, down from €2.5bn in 75 deals and representing a drop of 26pc in value and 29pc in volume.
Of the 65 deals completed in H1 2020, 82pc involved overseas buyers who invested 95pc of the total figure. In comparison to H1 2019, overseas investment dropped by just 10pc while domestic investment fell by 59pc.
Head of corporate and M&A at William Fry, Stephen Keogh, said that “for most markets, 2020 is likely to represent one of the lowest, if not the lowest, watermarks in M&A since the global financial crisis”.
He added that investors around the world were forced to adopt a “highly risk-averse mindset” in response to the pandemic. The report also stated that the size of Ireland’s economy makes it “especially sensitive” to border closures.
The majority of deals were mid-market, between €5m and €250m, and there were no large deals worth €500m or more. According to the report, the largest deal of H1 2020 was the acquisition of semiconductor innovator Decawave by US company Qorvo. It amounted to €363m.
Private equity holds up ‘incredibly well’
In terms of private equity, investment remained robust in the first half of the year. Qorvo’s acquisition of Decawave, for example, represented an exit for a number of venture capital funds including Act Venture Capital, Atlantic Bridge and Enterprise Ireland.
H1 2020 represented the highest half-yearly private equity transactions for the past seven years, amounting to 27 transactions despite a 19pc drop in deal value.
William Fry’s report said that private equity firms have also “proven themselves ready to invest in leisure” in the wake of Covid-19. The UK’s CVC Capital Partners, for example, acquired a 28pc share in Guinness PRO14, a rugby union competition, for €130m.
Which sectors fared the best?
Accounting for more than half of the total deal value and one-third of the volume, technology, media and telecoms (TMT) represented the strongest sector for M&A activity in H1.
According to William Fry, three of the top five deals of the period were in the TMT industry. This is likely due to “enforced distancing measures”, pushing businesses to rely on digital tools and infrastructure more than ever.
After TMT, pharmaceuticals, medical and biotech (PMB) was the second largest sector in Ireland in H1. Deal value reached €613m for PMB, representing almost one-third of Ireland’s total M&A value for the period.
William Fry attributes the success of the PMB sector to the acquisition of Medtronic spin-out Medtronic MiniMed by US firm Blackstone. This was the third largest transaction of H1, amounting to €299m.
An up-and-coming sector for M&A activity, William Fry added, is renewables. The sector was home to the largest domestic deal of the year so far across all sectors, according to the report, when Greencoat Renewable bought a 14.1MW windfarm in Letteragh, Co Galway for €35m.
Acquisitions outlook for H2 2020
Keogh said there is reason to be “cautiously optimistic” about a gradual rise in deal-making.
“The buoyancy of the M&A market will hang on the recovery of the global economy and on the government and health system’s ability to manage any potential local flare-ups of coronavirus,” he said.
“However, Ireland’s fundamentals, its historically strong economic growth combined with its technology and pharma expertise, are likely to remain a draw for investors not in spite of, but because of, the challenges of this particular economic and health crisis.”