I recently contributed to an article in the Sunday Business Post regarding the outlook for M&A in Ireland for 2022.

You can read my article below or click the PDF to read more. 

In the face of lockdowns, Irish M&A activity in 2021 has been on an upward trajectory and Walkers expects this positive trend to continue into next year.

You would be forgiven for feeling a sense of déjà vu when attempting to predict how the Irish M&A landscape will look next year, as the spectres of Covid and Brexit still hang over us, albeit without the same level of uncertainty and trepidation as this time last year.

The industry was optimistic coming into 2021 and this sentiment proved well-founded with the Irish M&A market experiencing a bumper year, hot on the heels of a busy second half to 2020. Much of the capital initially withheld due to the pandemic was deployed and many deals previously thought dead were resurrected, resulting in a strong performance for Irish M&A last year. 

Fresh challenges have arisen with inflation concerns, supply constraints and labour shortages proving problematic in some industries.  However the M&A community is better prepared now to overcome the challenges presented by the pandemic. The shock felt in 2020 has subsided to a large degree and the industry has rebounded and adapted with virtual meetings and remote closings becoming part of our daily working lives.

The appetite for deal making appears as strong as ever and the traditional indicators suggest that a buoyant year for Irish M&A awaits. Deal volumes reached a new record high in the first six months of 2021 and deal values have seen a significant increase. It is understandable that business owners' heads are being turned by potentially lucrative returns and it may prove difficult for some to resist any offer.

There is a school of thought that valuations could soon peak in some sectors, if they have not already, but the current valuations being offered will likely further drive M&A next year.

Perhaps a less tangible indicator is a perceived shift in attitudes. The pandemic has given us all time to reflect and re-evaluate our lives. We regularly read about the 'great resignation' or the 'big quit' phenomenon as millions of employees voluntarily change their priorities and jobs.  Business owners are no different, and for some, the challenge of running a business has become far less appealing during these uncertain times. Many owners find themselves considering their options when they might not have done so before. This owner fatigue could create an opportunity for third-party buyers but also ambitious management teams looking to take the step into ownership.

Walkers' outlook for 2022 is positive, but it is true that one man's misfortune is another man's opportunity, and we may see the trend of distressed sales, anticipated by many to happen this year, emerging in a more meaningful way next year. Some businesses are struggling to survive the extended imposition of restrictions and may find themselves vulnerable to opportunistic buyers. The hospitality sector in particular could see an uptick in deal activity as government supports and tax breaks are removed and domestic and international investors look to take advantage by acquiring assets at a discount.

Consolidation has been a big feature in recent years, and this will continue into 2022 as larger players look to futureproof their business and make strategic acquisitions while smaller players, especially in the financial services sector, look to realise value now rather than swimming against the tide of increased regulatory compliance.

The traditionally fragmented insurance broker market is an example of this and has seen an unprecedented number of deals done this year – and dealmakers expect to see more of these transactions in the coming months with private equity still attracted to these targets.

Another sector likely to experience consolidation is the aircraft-leasing industry for which Ireland has acted as an international hub for decades. Most of the commercial aircraft-leasing companies have a presence here and this global industry has been hit hard by the pandemic. Just last month, Dublin-based AerCap acquired GECAS to create the world's biggest aircraft lessor. Walkers have particular expertise within the aviation space and it expects to see further consolidation within this industry, though perhaps not on the same scale as the AerCap deal.

Not surprisingly, the wider tech/IT services and healthcare/lifesciences sectors will continue to dominate the Irish M&A landscape – and we expect to see this trend continuing. Fintech and regtech deals could become more prominent as the adoption of digital disruptive technology accelerates further following the switch to remote/hybrid working and the move towards a cashless economy.

Although not necessarily a new trend, 2022 will see increasing focus on sustainability. Since the recent COP26 climate summit in Glasgow, the green agenda has taken on a renewed sense of urgency and will likely become a top priority for CEOs and investors as we approach 2022. Ireland may not have seen too many climate-driven M&A deals to date, but our increasingly diverse renewables industry could find itself well positioned to benefit from any renewed focus on ESG should it come to pass.

Predicting what might happen next week, let alone next year has become an art form over the last 18 months. If Ireland and the world can avoid a return to widespread Covid restrictions, there is every reason to be confident of a busy year ahead for business owners, investors and their advisors.”