Ireland’s monetary crisis and its potential domino effect on UK deals

As pressure grows on Ireland to agree to an IMF rescue package, I thought it might be quite interesting to take a look at Irish deal activity over the last few years to see which countries have been active in Ireland and if there has been a noticeable downturn as this crisis has been growing.

Looking at the last 10 years worth of data, the Celtic Tiger has not been a country that has been targeted aggressively by the world’s deal makers. Ireland ranks in 32nd position in terms of providing the target company in global M&A activity with a deal value over that time period of just under £97.5bn.

However, it’s when you start to look at Irish deal activity in relation to the UK that you begin to wonder if the current crisis is yet another potential blow to the stuttering recovery of M&A activity involving the UK. Since 2000, Irish companies have been the target of deals involving UK acquirors to a value of £19.4bn. This doesn’t sound a lot, and is only just under 1% of the total value of deals carried out by UK acquirors globally in this time period, but Ireland is the country that has ranked as the 12th most targeted country of UK acquiriors. The biggest deals between the two countries have been pretty diversified in terms of the sectors, ranging from telecoms to wind farms to banking.

When we look at where the UK acquirors rank in relation to the Irish market as a whole then this £19.4n is a significant figure. After domestic Irish acquirors, UK companies account for 20% of all inward deal activity into Ireland. It will be no surprise to anyone that the next most acquisitive country of Irish targets is the US, but over the same time period US acquriors only accounted for just under 5% of all deals by value – a monetary figure of £4.7bn.

Given that UK banks are reported to have over £140bn worth of exposure to Ireland’s banks, this could be a factor that has the ability to derail the UK’s deal activity again. Should these UK banks be unable to retrieve their positions in Irish banks then once again the businesses struggling to access finance and the mid-market advisors trying to help them might find the Irish situation influencing UK deal making abilities in more ways than one.

I think it’s fair to say that the UK M&A community has good reasons for hoping that the IMF or the UK government will step in to help.