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2019 M&A activity expected to meet or exceed 2018 levels

2019 M&A activity expected to meet or exceed 2018 level

Survey conducted with many of Ireland’s leading executives and M&A advisers

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Kelli O'Malley

Communications Manager

KPMG in Ireland

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Key findings

  • The majority of respondents (60%) believe 2019 will continue to be a seller’s market with strong valuations and good availability of funding
  • The majority of respondents (75%) expressed concern that a no deal / hard Brexit will have a negative or neutral effect on deal activity in 2019
  • Debt continues to be the funding source of choice.  Global and domestic private equity will also feature prominently
  • Technology, Healthcare and Food and Agribusiness predicted to be the most active sectors consistently attracting global interest

KPMG today published the results of its annual M&A Outlook with a strong response from many of Ireland’s leading M&A executives and advisers.

The majority (87%) expect Irish M&A activity for 2019 to be at or above 2018 levels in what they believe will be a seller’s market, according to the KPMG annual survey.

Debt will once again be the primary source of deal funding, with attractive terms, flexible instruments and the presence of new lenders in the market.

Global and domestic private equity is also expected to feature prominently. The majority of respondents (60%) believe 2019 will continue to be a seller’s market with strong valuations and good availability of funding. A deterioration in the global economy may cause a shift favouring buyers over time.

Brexit

A significant proportion of survey participants (75%) believe a no deal / hard Brexit will have an adverse or neutral effect on deal activity in 2019 – a far more negative outlook in comparison to 2018.

The imminence of the Brexit decision, with its wide ranging impact on trade, border controls, cross border tariffs, the tax and regulation environment and foreign exchange markets make accurate forecasting and managing 2019 expectations challenging for the Irish M&A community.

Conversely, many note the increased attraction for UK businesses to acquire Irish companies during 2019 as a defensive restructuring mechanism and a means of de-risking in the context of regulatory and supply chain uncertainty. 

Similarly, 2019 may present a window for opportunistic Irish companies to acquire and build positions in the UK market through strategic acquisition. 

Key Sectors

The KPMG M&A Outlook 2019 report also shows that Technology, Healthcare, Food and Agribusiness will again be the most active sectors consistently attracting global interest.

Other key findings of the report include:

  • Deal Drivers  - an increasing proportion of M&A executives expect strategic merit/fit to be the primary driver of acquisitions
  • M&A Growth Stimulants – respondents generally assert that deal activity can be further stimulated by building awareness of available targets and more sophisticated vendor preparation
  • Integration – cultural misalignment, people related challenges and inadequate diligence and planning are the main factors cited for post deal integration failures
  • Exit – compared with previous years, a growing share of respondents think disposals to financial buyers will be the most likely exit option


Commenting on the findings, Mark Collins, Partner and Head of Transaction Services, KPMG in Ireland said: “In the five years that we have been conducting this survey, 2019 is undoubtedly one of the most difficult to predict. However, despite the various macro headwinds, our survey indicates sustained deal activity through 2019.  M&A executives believe that, for the time being, it continues to be a seller’s market having regard to strong valuations and access to funding. Depending on the strength of capital markets and sustainability of corporate earnings, this balance may shift towards buyers as the year unfolds. A carefully designed approach to M&A, now more than ever, forms a key plank in the strategic foundations of Irish business.”   

David O’Kelly, Partner, Corporate Finance, KPMG in Ireland, said “An overarching survey sentiment is the positive impact of the robust funding environment, with increased competition for targets among well-funded trade and financial buyers.  This competition we are seeing amongst buyers for attractive acquisition targets augurs well for Irish M&A activity into the future and creates interesting opportunities for Irish business owners.”

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