Posted on Tuesday 23 February 2016 by Ulster Business
From left, Noel Culbert, Iain Lees and Barry-John Kelly
The UK economy may be recovering more slowly than economists had forecast and political leaders had hoped, but the mergers and acquisition (M&A) bandwagon is on a roll.
One estimate puts the value of UK M&A activity during 2015 at around £344bn, a whopping 90% up on 2014 and the highest level by value since 2007. Northern Ireland reflected the UK trend with a record number of deals and the second-highest value of transactions since 2001.
Local deals ranged from Moy Park and JMF-Terex, to H&J Martin-Lagan, with the sale of UTV to ITV, rounding off a year which saw 59 deals with a total value of just over £1.2bn. Also included in the total was a welcome number of new investments and indicators of confidence and recovery. These included Hospital Services, a rare private equity-backed management buy-in; Braidwater, which saw the first investment into Northern Ireland by the Business Growth Fund; while Kainos represented the first initial public offering (IPO) since 2004.
PwC NI’s head of corporate finance Noel Culbert, says the recovery in M&A activity across the UK has stimulated interest in Northern Ireland. “There is a lot of capital looking for a home and, with the remarkable growth in M&A activity in Britain, Northern Ireland has begun to appear on investor’s radar. The scarcity of good opportunities elsewhere is providing a window for local companies to exploit and a growing volume of international funding - as well as UK and Irish money – is looking to invest or support investment in strongly performing companies.”
PwC says that local corporates have been very successful in creating a niche for their growth within a broad range of sectors and Noel Culbert points to a significant number of family-owned and owner-managed companies that have driven growth in export markets from a relatively low-cost base in Northern Ireland. “Buyers are in the market for companies that demonstrate deep sectoral expertise locally, nationally and internationally. That alone can significantly increase the options for value enhancement and these characteristics are very attractive to investors and their capital.”
Looking to 2016, Barry-John Kelly, PwC’s Head of Mid-Tier Transactions in Northern Ireland points to food processing as a sector already attracting investor interest, with manufacturing companies demonstrating growth prospects as another area appealing to private equity investors: “As well as food processing and manufacturing, we’re sensing that a consolidation in energy companies could be on the cards, with significant potential for land transactions and refinancing in a post-Cerberus environment.
“But one area to watch is Fin Tech, where peer-to-peer lender platforms and online money transfer services played a major role in raising $3.6 billion in venture capital funding for the UK’s technology sector in 2015. Fin tech is the most talked-about technology segment and companies operating in that space, are likely to become particularly attractive to investors.”
PwC in Northern Ireland has recruited 15 leading financial technology specialists to exploit and commercialise blockchain, the technology that powers the crypto-currency, Bitcoin. The team is expected to grow to over 40 during 2016.
Together with Barry-John Kelly and Iain Lees, PwC in Northern Ireland has advised on a number of large deals in 2015 across multiple sectors and geographies. Noel Culbert says this is largely due to PwC Northern Ireland’s access to PwC’s global network. “Over the last few years the majority of successful deals were through a single point approach, vendors are now realising that the market is there with deep buyer pools and liquidity and are therefore proactively seeking to engage in a process with more than one potential investor. This provides a real opportunity for maximising value and no longer requires the vendor to cross their fingers and hope that a deal goes through.”
He concluded. “On the back of a very active 2015, investors are in the market for Northern Ireland deals. That means there is a real opportunity for NI corporates to achieve strong value from the busy global market. We saw record growth and great deals in 2015 and 2016 could prove even better.”