BearingPoint’s Michael O’Dwyer spoke to SiliconRepublic.com about the M&A landscape in Ireland. He advises companies to be ‘clear on their goals’ before contemplating a bid.
“Ireland has a vibrant mergers and acquisitions (M&A) market.” This is according to BearingPoint Ireland partner Michael O’Dwyer. O’Dwyer manages the company’s technology delivery teams including architecture, systems integration and IT advisory services.
O’Dwyer thinks that the rise in the number of M&As in recent years is “driven by the strength in the Irish market, political stability, a tech-literate workforce and an attractive tax environment”.
“The Irish ecosystem is maturing, which has resulted in more companies reaching a scale that makes them attractive to acquisition.”
A recent report by law firm William Fry showed that “Ireland’s economy continues to outperform” with an estimated GDP growth of 9pc in 2022, ahead of the average across the EU of 3.2pc. Though predicted to be slower in 2023, Ireland’s growth will remain well above the EU average, according to the International Monetary Fund.
William Fry described 2021 as “a bumper year” for Irish M&As, and though that “anomalous” year is difficult to match, activity in 2022 “remained strong”. The overall value of the 300 deals completed in 2022 was €14.8bn, with 86pc of the deals worth between €5m and €250m. Seven deals were worth more than €500m. Of the total deals, 216 were inbound, to the value of €12.5bn.
The deals covered a wide range of sectors, including financial services, real estate, utilities and pharmaceuticals.
Impact on Irish economy
This is of benefit to the wider economy because “M&As are a key driver of inorganic growth”, O’Dwyer says.
“Companies who pursue an M&A opportunity are seeking strategic growth opportunities through acquiring a target. This can be the opportunity to enter new markets, obtain new customers or access key resources.”
According to O’Dwyer, smart M&As can offer companies the chance to “obtain ownership of a strategically important piece of technology or intellectual property portfolio”.
And, of course, by consolidating core functions, a merged company can streamline their business and eliminate costs.
O’Dwyer suggests that one of the key potentialities of M&As is the “opportunity to accelerate the development of the business, product or team that the seller has created to date, as part of a larger and perhaps more internationally focused organisation”.
“New ownership can bring new energy into a business which can achieve a greater rate of growth.”
Challenging macroeconomic environment
In April, market data provider Refinitiv released a report which showed that the value of Irish M&As had fallen by 87pc in the first quarter of 2023, compared to the same period last year. However, the number of deals remained high.
At the time, Ian McFarlane, Ireland country manager at London Stock Exchange Group, said, “Global M&A dealmaking continues to remain subdued due to recent recurrent interest rate hikes amidst record inflation and economic uncertainty and will likely continue that way for the majority of 2023”.
However, McFarlane is hopeful that Ireland will “outperform other countries and regions given its strong economic outlook and continued foreign direct investment.”
During times of economic uncertainty, it’s more important than ever to carefully consider any potential merger or acquisition.
Advice for M&As
“M&As can be risky if not properly planned and executed,” says O’Dwyer. Without due diligence, companies can face many post-merger challenges, including staff retention issues, culture clashes and technology integration problems.
“Whether a company is acquiring or divesting, gaining clarity on the current state of technology and how this will be integrated or separated out as part of a transaction is key,” O’Dwyer says.
Before undertaking a merger or acquisition in the Irish market, he recommends that “companies need to have a clear strategy and target profile”.
“An M&A takes time, requires focus of management and may not result in an agreement at the end.”
“Our advice is that a company needs to be clear on their goals and that an M&A is the appropriate approach to achieving these.”
Finally, O’Dwyer advises companies to develop “a detailed post-merger integration plan”.
“The [plan] can often be neglected when making the deal and this impacts on or delays the achievement of benefits.”
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