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Over the past decade or more, inward foreign investment (FDI) by foreign multinational companies has played a significant role in Ireland’s economic development.
While Irish businesses have traditionally accessed overseas markets through exports, they are increasingly expanding their commercial presence and activities in overseas markets through mergers or acquisitions of overseas businesses, the establishment of new operations in overseas locations or the establishment of joint ventures in overseas locations.
In its statement on overseas direct investment (ODI) in October 2007 Forfas, Ireland’s National Policy and Advisory Board on Enterprise, Trade and Innovation, estimated that between 2000 and 2005 ODI from Irish businesses rose by almost 325 per cent and that for the first time in 2004 the amount of ODI exceeded the amount of FDI.
This was a very important milestone. While there is not at present any published data on the amount of ODI from Irish businesses for 2007, all indications are that, taking just the contribution to ODI from mergers and acquisitions, 2007 was a big year for Irish business.
Education Media and Publishing Group was formed from the mergers of Riverdeep Interactive Learning, the Irish educational software publisher, with Houghton Mifflin and the Harcourt publishing division of Reed Elsevier, to form a pre-eminent educational publisher. Those acquisitions had a total transaction value of approximately $8bn.
CRH (the leading Irish buildings materials group) concluded EURO2.2bn of acquisitions in 2007, a new record for CRH. These acquisitions included the Swiss builders merchant Getaz Romang and the buyout of Cementbouw BV in the Netherlands.
In addition, Syncreon was formed following the acquisition by Irish based Walsh Western International of TDS Logistics to from a leader in global supply chain management.
It seems very likely that we will see increasing levels of ODI by Irish businesses as the full effects of globalisation on the Irish economy are felt. There is a possibility, however, that increasing levels of ODI do pose a threat to the Irish economy.
In its report Forfas identified, in particular the risk to lower value jobs and the consequential economic insecurity and instability that could create in the labour market.
It concluded, however, that ODI has had a positive impact on employment levels within investing businesses and businesses in downstream industries (like law firms); that there is a correlation between ODI intensity and growth in highly skilled employees in investing businesses; and investing businesses have experienced a positive impact on profitability. Overall it is felt that ODI will have a net positive impact on the Irish economy.
What is key for the leading Irish law firms is being able to respond to and support the overseas ambitions of our clients – often in conjunction with overseas counsel. A good barometer of our success in doing this and of the global focus of Irish businesses are the Mergermarket league tables. The outcome for 2007 shows that 30 per cent of the EURO15.1bn of transactions concluded by the leading Irish law firm’s in 2007 were overseas acquisitions by Irish companies.
Ireland is a small country that has benefited greatly from embracing globalisation by creating one of the world’s more open economies. While the realities of the global economy pose significant challenges, Irish businesses are seizing the opportunity presented by it to extend their global position – and that is good for all of us.
Edward Miller, partner, Matheson Ormsby Prentice