Commercial corporate buyers have come back into play in the highly competitive Irish M&A market

Trade buyers are positioning themselves for a comeback in Ireland’s mergers and acquisitions (M&A) market as rising debt costs put pressure on once-dominant private equity firms.

Companies are now poised to benefit from strong balance sheets and attractive valuations after years of losing to the firepower of buyout firms saturated with cheap finance.

Large companies in particular are now poised to bid for growth and innovation in hot sectors such as technology, life sciences, fintech and engineering, where Ireland has a strong track record.

“For the first time in a long while, companies are on an equal footing to more easily compete with private equity,” said Fergal McEleavy, Head of M&A at EY Ireland.

“It’s gotten a lot more expensive with interest rate hikes, and the risk is higher because of market influences like geopolitics, inflation and energy. [Private equity] willing to offer less capital out the door.”

Another factor is the cooling in company valuations, which has made company buyers more competitive again.

“Companies haven’t borrowed as much, their balance sheets aren’t overly leveraged, they have cash on the balance sheet,” said Mr. McEleavy. “And I think the world has gone back to where valuations are more affordable, mostly because the private equity guys can’t pay that much.”

He said most recent bidding rounds until recently have included all private equity buyers, with companies losing out on assets. Now, he said, commercial buyers make up about half of the mix.

However, he does not count private equity as a factor in the long term as soon as the general economic conditions stabilize again.

“There’s still a lot of capital out there,” said Mr. McEleavy. “So it could be a bit like Covid. There was a natural pause. Nobody knew how things would turn out. Everyone held off for three, six months, but then once people kind of got used to the new norm, there was a pretty big spike in activity.”

Separately, growth capital fund BGF has exited its investment in Irish kitchen manufacturer Uform, bringing in private equity firm Cardinal Capital as its majority shareholder while retaining a minority stake in the company.

BGF, which is backed by Ireland Strategic Investment Fund (ISIF) and is one of the most active growth equity investors in the Irish market, made a multi-million euro investment in Uform in 2019.

Since then, the Antrim and Donegal based company has grown at an average of 40 per cent a year while increasing its share of markets in Ireland, Northern Ireland and the UK.

Cardinal Ireland Partners, the Irish private equity growth fund managed by Cardinal Capital Group, has bought out BGF’s original investment in Uform and plans to scale the business. As part of the transaction, BGF will reinvest alongside Cardinal

“We look forward to reinvesting in the business in the future and continuing our association with the company as it enters this next phase of its growth trajectory,” said Graham Clarke, an investor at BGF.

“The exit from our original investment has generated a return of more than 2x with a strong IRR of 25 percent, clearly demonstrating the high quality of the entrepreneurs and businesses we support.” Commercial corporate buyers have come back into play in the highly competitive Irish M&A market

Fry Electronics Team

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