On Friday, Tom wrote an excellent column exploring the strategy behind Twitter’s recent acquisition of the young Irish mobile technology firm OpenBack. Although Twitter did not disclose the purchase price, Tom put the figure at around €20 million. It was a great return for a great business.
There was a clear commercial rationale for the purchase – OpenBack has developed code to make better push notifications, and the social media platform believes it will assist its efforts to better monetise its user base.
But it fits within a broader pattern in corporate Ireland right now: dealmaking. I have been working in business journalism for close to 20 years, and I have never witnessed anything like the scale of corporate M&A activity that has been happening over the last year.
Private equity deals grew at a rate of almost 5x last year. PE really is unusually active here. It accounted for half of the value of deals in Ireland in the first half of 2021, compared to 18 per cent globally.
Clearly, some sectors are hot right now. Take the insurance sector. Primarily backed by a wall of international private equity, a small number of large brokers are currently on a land grab in Ireland, all seeking to gain a foothold in a potentially lucrative market. Private equity is also going after Irish pubs, nursing homes, even vet practices.
And there has been no slowdown in the first three months of the year. I pulled together some data for the first quarter. The breadth and the range of the deal flow is staggering. There are clearly some big-ticket deals, such as JP Morgan’s $730 million buyout of Global Shares, the Clonakilty-based fintech, and Brookfield’s acquisition of Hibernia Reit.
But there is also a torrent of smaller, under-the-radar deals. For example, Levy UK + Ireland, the sports and hospitality sector of Compass Group UK and Ireland, quietly announced that it is combining its Irish business with Fitzers Catering, the Irish family-owned catering company. Based on my calculations, there have been in the region of 75 Irish deals this year, the majority of them involving foreign buyers.
However, it all begs a big question: Can the wave of dealmaking last?
Most of the corporate finance houses in Ireland still have a strong pipeline of mandates. But many date back a little, and most are reporting a minor slowdown in engagements. Plus, they say that deals are harder to close.
The data from the US supports this. On Wednesday, JP Morgan Chase published its first-quarter results – profits fell sharply from a year earlier, driven by increased costs for bad loans and market upheaval caused by the Ukraine war. Meanwhile, Goldman Sachs reported a 42 per cent drop in profits in the first quarter to nearly $4 billion, down from $6.8 billion a year earlier. Revenues fell 27 per cent to just under $13 billion due to “significantly lower” income from its asset management and investment banking divisions.
Back at home, in its latest update, the Central Bank said the Russian invasion of Ukraine has sparked a chain of events that presents significant challenges to the outlook for inflation and growth. “There is now a central outlook for slower than previously expected, but still positive economic growth, and markedly higher inflation over the short term,” the bank said.
The ESRI, meanwhile, is warning about the economic impact of inflation, saying that inflationary pressures had already been mounting in the latter half of 2021 due to supply chain problems and a rapid recovery in consumption, and that this is likely to intensify as a consequence of the invasion of Ukraine. “Economic sanctions imposed on Russia and disruptions to supply are likely to persist and feed into consumer prices. Given these uncertainties, we now anticipate average inflation of 6.7 per cent in 2022 and 5.0 per cent in 2023,” according to the institute.
The former governor of the Central Bank, Patrick Honohan, touched upon the impact of inflation on the Irish economy in a column on the site last week. “Assuming that the ECB does bring inflation back under control, an important danger for any small euro area country like Ireland is that its price and wage response to the current inflation surge might bake in a higher cost structure that would price Ireland out of foreign markets, triggering job losses. We don’t now have devaluation as a safety valve for such pricing mistakes, so the consequences could be painful,” he said.
I have written before about the various factors behind the dealmaking, such as the rush for defensible businesses and the wall of international capital. However, the global mood music is changing. The economic outlook is more sombre. This will undoubtedly impact on the level of M&A activity.
Elsewhere last week, Eamonn O’Reilly, outgoing chief executive of Dublin Port Authority, discussed the extreme challenges facing the shipping industry and how he is funding the €1.6 billion masterplan to expand the port. He also talked about the sacking of 800 P&O workers last month to be replaced with cheaper agency crews, who are paid as little as £1.80 an hour.
“I wouldn’t exactly be a card-carrying member of a trade union, but it does show the importance of things like the International Transport Workers’ Federation (ITF) which is a worldwide trade union looking after the interests of seafarers,” he said.
Some 36 years after joining Dermot Desmond and a fledgling NCB, Liam Booth is preparing to step down as managing director of Investec Corporate Finance. From advising Valeo and the Mater to helping float ICG and Kingspan, he talked openly with Tom about his career.
As managing director of Massey Bros, Susan Guinan runs one of the largest funeral directors with nine funeral homes in the capital. She talked about technological advances in the industry, how Covid reshaped the sector and her plan to expand into funeral planning.
An IT analyst at tech multinational Infosys India was fired while on a temporary assignment to Ireland. In a case that has ramifications for other multinationals, the Labour Court has ruled he can bring an unfair dismissal claim under Irish law. Francesca had the details.
I reported on Co Louth firm Premier Periclase, where a lot of people are set to sadly lose their jobs. It was set to be acquired out of examinership by quoted Australian company Calix. However, it has now pulled out due to spiralling gas prices and the only other bidder wants to reduce its 94 staff by 66 per cent.