Irish M&A activity has slowed dramatically: ‘This pent-up capital needs to be deployed at some point'

Irish Independent

17-05-2025

Several Irish M&A market experts described to the Sunday Independent how deals have been taking longer to execute, with extensive due diligence procedures helping extend some deal timelines from 12 weeks to up to six months.
Buyers are also paying more attention to how exposed companies' sales and supply chains were to the US market and tariffs.
Figures from Mergermarket, a global provider of M&A intelligence, show that only 28 domestic deals have been completed so far in the second quarter of the year, with a combined value of €1.26bn.
While there is still time to run in the period, the figures were some distance off the totals in the first quarter of the year, when 129 deals were announced with a total value of over €7.04bn.
Despite an apparent lull, most experts feel a strong pipeline of M&A activity is kicking off again, with the likes of listed hotel group Dalata seeking a buyer. More prospects have emerged in recent weeks, aided by US moves to do a trade deal with the UK and enter talks with China.
Andrew McIntyre, head of William Fry's corporate/M&A department, said transactional work had been 'quieter' across the market over the first quarter, though it was beginning to heat up again in the past month.
'Anything that affects activity and trade is going to affect investors and buyers,' he said. 'They will consider things more carefully when those kinds of tensions are ongoing.
'What that leads to, though, is pent-up capital that needs to be deployed at some point. So we're hoping we will see a return a little later in the year, when things ease.'
The cost of capital is higher. I think that is being reflected
McIntyre said deals hadn't 'fallen away' but were taking longer to complete. Interest in M&A remained high, especially from international buyers, with recent 'green shoots' providing hope that more deals will close over the second half of the year.
'I'm working on something now in the retail space where they have courted a lot of buyers and investors over the years, and are now thinking: 'Well, maybe now is the right time, but we just don't know yet.'
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'With the uncertainty of where things might end up in the next couple of months, people are being cautious and slower to make decisions,' he added. 'That doesn't mean decisions won't be made – they will get their deals away – but transactions have slowed down.'
Uncertainty over how US tariffs will play out has been a big reason for some deals slowing.
Brendan Traynor, a co-founder of Irish private equity fund Renatus, said when uncertainty hits the market, it becomes difficult to answer the 'hard questions' in M&A discussions with certainty. This hits some sectors more than others.
In its Q1 M&A report, Renatus found that 132 deals had been completed, a 39pc increase from the previous year. However, they noted that uncertainties around global trade could negatively affect investment and slow down deal activity.
Traynor said the figures did not reflect 'what is actually going on'.
'We are likely to see some slowdown given current macro tariffs and general uncertainty going into the remainder of the year,' he said.
'There are some sectors acutely affected by the tariff situation, where there's probably a ­tempering of activity, or a pause. In Ireland, principally, that is pharma and medical. Some in the drinks industry are coming in. That will have an impact on activity.
'More generally, the impact of Trump and tariffs are definitely delaying some deals. But it's all down to the level of exposure a business has.'
Traynor said the 'soil conditions' were positive for M&A deals over the rest of the year, believing more clarity on tariffs will bring about a 'steep uplift in deals'.
He highlighted strong activity in financial services, wealth management, veterinary, dental, and technology, with rollups playing out across the board.
'Nobody has a crystal ball on this,' he said. 'At this stage of the year, the deal market is on track with last year, but likely to take somewhat of a dip in the next quarter, picking up in Q3 and Q4.'
Some involved in M&A have no plans to slow down, despite acknowledging signs of a lull.
Laura Dillon, a partner with Dutch private equity group Waterland and head of its Irish unit, is looking for entrepreneurs who want to sell their businesses.
Waterland is among Ireland's consolidators, acquiring domestic firms in the same sector – such as engineering, professional services, pharmaceutical packaging, and food – to create companies of scale.
'I think three or four of our portfolio companies currently have add-on acquisitions in due diligence at the moment,' said Dillon.
'We probably have a handful of companies that I'm feeling relatively positive about, but let's see if they will become the next platform for us. Hopefully, we will get more than one platform done. I'm feeling pretty positive we can get two or three platforms done later this year.'
While Dillon is busy with Waterland, she had heard deals were 'definitely taking longer' and that 'people are quieter than they might like to be', especially regarding investments in America and from the US into Ireland.
However, Dillon added that every period of volatility creates opportunity. She said her pipeline was 'probably the strongest it has ever been'.
Uncertainty in the market has also created opportunities for Irish players looking to scale through acquisition.
Colm Kelleher, boss of financial advisory firm LHK Group, said he had a couple of purchases in the pipeline he hopes to complete before the end of the year.
Kelleher also spoke of uncertainty in the M&A market. In his sector – insurance and pensions – he felt some of the large private equity consolidators had slowed, and believes this was due to debt being expensive.
Kelleher says he feels valuations have become more 'realistic'.
'I think what we have probably seen is a bigger disparity between what would be recognised as very good businesses and maybe businesses that aren't necessarily performing as strongly,' he said.
'Two years ago, nearly everything was getting a high valuation. There is a bigger delta coming in the values than we would have seen historically.
'Good businesses are still getting strong valuations,' he added. 'The cost of capital is higher. I think that is being reflected.
"There is a riskier environment, and the cost of funding is higher. People are paying a lot more attention to due diligence'.
All agreed the prospects for later this year were promising. Plenty of capital is waiting to be deployed.
Fergal McAleavey, corporate finance partner at EY Ireland, said the volume and value of deals had been consistent with previous years. However, he acknowledged a lull a month ago. He noted Irish firms and private equity funds had raised a lot of capital and were preparing for acquisitions.
'Even alone in the last few months, there's been four companies that I can think of that have raised more than €100m of investment capital,' he said. 'A couple of years ago, if one company did that, it'd be huge news.'
'I think across the board, the noise that was in the system has gone out of it, and people who may have paused deliberately or slowed things down, that momentum is picking back up again.'