Irish law firms dominate M&A, but deal boom belies falling values

This article was first published in the Irish Independent, 7th January 2023.

A&L Goodbody topped the legal league tables while Goldman was the most active investment bank.

Deal making in Ireland continued at a breakneck pace last year, but uncertain global economic conditions and higher funding costs dampened valuations and big-ticket activity after a bumper 2021. Ireland saw the second-highest number of mergers and acquisitions (M&A) since 1980, with 613 transactions – short only of last year’s 703 deals, according to research prepared for the Irish Independent by financial data provider Refinitiv, an LSEG business. The data shows domestic law firms retained their dominance as key advisers on Irish activity despite a push by international players into the market, but in contrast, global investment banks are grabbing financial advice mandates.

The value of all that activity fell by 69pc to just over $30.5bn (€29bn), roughly equivalent to the numbers seen in 2012 when Ireland was still experiencing the effects of the financial crisis. Much of the drop-off can be attributed to the lack of megadeals last year when compared to 2021, when just two transactions accounted for almost half of the year’s value. The other factors are mostly global and likely to persist in 2023, despite local conditions remaining relatively positive.

“It is likely that global M&A in 2023 will continue to remain impacted from higher inflation, higher borrowing costs, central bank rate increases, the war in Ukraine, economic uncertainty in the US and Europe and an increase in regulatory scrutiny, particularly in the US” said Ian McFarlane, Refinitiv’s Ireland country manager.

A&L Goodbody came top of the table of legal advisers after being involved in 54 deals worth nearly $4.6bn. A&L also headed the list last year, too, in terms of both deal volume and value, having advised on 84 transactions worth almost $64bn. A&L said investors were slowing their portfolio growth out of caution about the economy, but that buyers would be active but “choosy”.

“Buyers are definitely being more cautious about the assets they choose to acquire” said Richard Grey, partner and head of M&A at A&L Goodbody. "Because debt markets aren’t as open as they once were, buyers have to fund from their balance sheet or with very expensive debt. You’ll definitely see M&A continue, but only in certain sectors.” He said energy and infrastructure would be a hot sector in Ireland, with offshore wind and broadband likely to see “very significant expenditure”.

Goldman Sachs topped the chart for financial advisers, which is dominated by global investment banks. The Wall Street giant advised on nine deals worth $10.6bn. Goodbody Stockbrokers was the only local investment bank in the top 10, having advised on Hibernia Reit’s delisting and take-private by Brookfield Asset Management – one of the biggest deals of 2022. Overall, deals worth $10.8bn involved an Irish target, 63pc less than 2021. Inbound M&A involving a foreign buyer reached $9.8bn, while domestic deals totalled just under $1bn, a six-year low.

Date published: 09 January 2023