On the evidence to date, it would appear that the Celtic Tiger has not yet lost its bite. The National Institute of Economic and Social Research predicted in its spring 2005 quarterly economic commentary that the Irish economy would resume on a relatively strong growth path, with rates of 5.7 per cent in real GDP and 5 per cent for real GNP forecast for 2005, followed by rates of 5.5 per cent and 5.8 per cent respectively in 2006.
Economic growth, coupled with low interest rates and sustained high levels of Irish corporate activity in 2004, look set to continue during 2005. Ion Equity’s latest M&A tracker survey reported that Irish companies were involved in M&A worth almost €4bn (£2.72bn) in the first quarter of 2005 – almost double the value during the same period in the previous year.
Some of the highest-profile transactions of recent months have been public takeovers, including the offer for Arcon International Resources by Canadian company Lundin Mining Corporation, and in the builders merchants and DIY sector, the offer by Grafton Group for Heiton Group.
While buyouts have been fewer during the last year than in the previous one, the values of the entities involved would appear to have increased. High-profile transactions during 2004 were the secondary buyouts of Green Property and Clondalkin and the management buyout of the Caulfield group of supermarkets and shopping centres last summer.
The cycle of take-privates appears to be at an end, with no major public-to-private transactions in the last year. There is growing speculation that a number of Irish companies are considering listings, perhaps encouraged by the successful IPOs of C&C Group and eircom in 2004, the growing conviction that the international equity markets have stabilised and the perception that there is a growing Irish and international investor base with an appetite for equities. Speculation around the future of Aer Lingus continues and a considerable number of column inches have been devoted recently to predictions that IAWS Co-op (which has just acquired the business outsourcing and energy divisions of South West Services) will seek a listing over the coming months.
In addition to seeking to encourage established companies to list, the Irish Stock Exchange launched the Irish Enterprise Exchange (IEX) in April with a view to meeting the requirements of small and mid-sized Irish companies seeking access to public markets in Ireland. Perhaps spurred on by an ever-increasing number of Irish companies listing on AIM (CNG, Smart Telecom, Calyx and Adwalker, to name but a few), the IEX admission rules have been designed to complement the AIM admission rules in order to allow companies the option of coordinating admission to both markets using the same timetable and substantially the same admission document. As with AIM, the admission rules for the IEX do not require a trading record or a minimum number of shares in public hands, and in most cases prior shareholder approval will not be required for acquisitions or disposals. However, whereas AIM has no requirement as to market capitalisation, the IEX requires a minimum of €5m (£3.4m). All IEX companies will participate in the Irish Stock Exchange Equity Overall (ISEQ) Index, which should increase their visibility to institutional and retail investors. For the type of company targeted by the IEX, 2005 has so far been a good year. Ion Equity has reported a surge in venture capital investment in the first quarter of the year, with €75.4m (£51.3m) invested – more than twice the figure invested during the previous quarter and almost half the total amount raised last year. Corvil, Aepona and Irish Broadband were each reported to have raised more than €15m (£10.2m) in venture capital in the first quarter of 2005, compared with just one company raising that figure in the whole of 2004. Overall, during the first three months of 2005, it was reported that a total of 12 companies raised funds (more than any quarter since 2003), with an average deal size of €6.3m (£4.3m) – up 35 per cent on 2004.
Irish companies have also been very active in making acquisitions at home and abroad. While CRH is reported to have made more than 20 acquisitions, with consideration totalling in excess of €800m (£544.7m) during 2004, the Kerry Group is not far behind in value if not volume, having reportedly made eight acquisitions worth more than €680m (£463m) during the same period. Other high-profile transactions include the acquisition of Superquinn by Select Retail Holdings, the Savoy Group acquisition by Quinlan Private and that of the Whelehan Group by Uniphar. Irish companies acquired by overseas acquirers during recent months include Spectel (acquired by Avaya), Coyle Hamilton (acquired by Willis Group) and Lake Communications (acquired by Inter-Tel). The media sector has also been active over the past 12 months, with Celtic Media Group acquiring both The Anglo-Celt newspaper and the Westmeath Examiner Group, as well as the auction for a controlling stake in LMFM Radio, in which Ulster Television was ultimately successful.
In overall terms, the prospects for corporate activity for the rest of the year look promising.
Brian O’Gorman is a partner in the corporate group at Arthur Cox
