IRELAND

M&A Activity in Ireland: a Positive Outlook

he Irish M&A market continued to latter half of the year to deter such deals, inversions grow in 2014, built upon a steady re- remained a key driver behind M&A growth in covery in recent years. The market is 2014, with a number of deals in the pharmaceutical now showing renewed impetus with sector continuing the trend of recent years. foreign investment through M&A The stand out deal of the year, responsible for andT a number of stand out deals. Ireland suffered a large portion of the latest total deal value mile- a painful economic contraction from 2008 onwards stone reached by the Irish M&A market, was the requiring external assistance from the “Troika” of US-based medical device maker Medtronic’s €33.9 the EU / the ECB and the IMF. Having entered its billion acquisition of healthcare company Covidien external assistance programme in 2010, the end of plc. The Medtronic/Covidien deal was the largest 2013 saw Ireland become the first eurozone country deal in Europe in 2014 by value when announced to exit such a program. This progress along the road and was ranked third globally and fourth in the US. to economic recovery set an encouraging tone for The transaction is expected to close in early 2015. 2014, leading to a more buoyant M&A market and Since its inversion into Ireland in 2013 by way of the long-awaited return to some domestic driven ac- a $8.5 billion acquisition of Warner Chilcott, Ac- tivity. This positive outlook was reflected in the first tavis has continued to be the most active buyer of half of 2014 with an 18.5% increase on the number drug companies in recent years. 2014 saw Actavis of deals from the first half of 2013 and €97.4 billion announce two notable deals – its €18 billion acqui- worth of deals announced, the highest figure ever sition of Forest Labs and its proposed $66 billion recorded for a half year. acquisition of Allergan. Actavis emerged as the suc- cessful counter-bidder for Allergan after months Key factors behind the rise of battling between Valeant and Allergan, during in Irish M&A in 2014 which Allergan pursued several lines of defence. Corporate Migrations Another deal highlighting the popularity of inver- While 2014 has seen more of a variety of deals in sions in the pharma sector in 2014 saw US-based terms of sector and type than in recent years, there Horizon Pharma acquire Irish-based Vidara Ther- is still no denying the impact which corporate mi- apeutics for €474 million. grations/inversions deals have had on the market in 2014. These are transactions that, if structured Sale of State Assets correctly, enable a US corporation to re-incorpo- The Government’s program for the sale of state assets rate and change its tax domicile to Ireland without has been another factor in the 2014 market, stemming triggering the US anti-inversion rules. While moves from the economic downturn. Having committed to were taken by the US Treasury Department in the the sale of a number of State assets including Coillte

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Global M&A_Ireland_ALGoodbody_Final.indd 66 12/14/14 3:50 PM (State forestry), Bord Gáis London Stock Exchange in Energy (the State gas utility) December 2013 while Green and its remaining share (25%) REIT Plc raised a further €400 in Aer Lingus (airline), 2014 million in 2014. The Dalata saw the conclusion of the first Hotel Group also raised €265 of these sales, being the sale of million in funding through Bord Gáis Energy. The third an initial public offering in most valuable deal of H1 2014 and London in March was the privatisation of Bord 2014. All three have invested Gáis Energy, following its significantly in Irish properties sale for €1.1 billion to a group during 2014, with Dalata cur- including UK multi-national rently in talks with the Moran Centrica and Canada’s Brook- & Bewley’s Hotel Group about a field Renewable. This was the possible reverse takeover for an most significant sale of a semi- estimated €450 million. In an- state corporate asset by the Irish other encouraging development, State since the privatisation of the Irish Residential Properties Aer Lingus in 2006. C ian McCourt REIT plc, a subsidiary of Toron- RESIDENT PARTNER to-based Canadian Apartment Bank Deleveraging A&L Goodbody Properties Real Estate Invest- The recent trend of delevearag- New York ment Trust, secured €130 mil- ing by domestic Irish banks and lion debt funding in addition to a number of foreign banks continued throughout €200 million raised from its IPO in April 2014. 2014 at an even more accelerated pace than in re- cent years. Ireland was the busiest loan sales market Projections for continued in Europe in 2014, with portfolios with a face value growth in 2015 of €28.5 billion sold in the first nine months of the A real positive from 2014 is the greater proportion year, more than 14 times the level achieved in the of domestic driven M&A activity, which we project same period in 2013. will continue into 2015. As Ireland makes strong This has been a key factor in driving M&A activ- progress on the road to recovery, nearly one third of ity with a large number of loan portfolios coming all deals in the first half of 2014 were domestic, com- to the market from the likes of RBS / Ulster Bank, pared with 27% in the whole of 2013. Driving this Bank of Scotland and most notably IBRC. The liq- are highly competitive domestic markets in need uidator appointed to wind-up IBRC (formerly Anglo of consolidation. A notable example is the flurry of Irish Bank plc) by the Irish government under spe- activity in the food and food services sector, which cial emergency legislation in 2013 has overseen as- included the management buyout of Freshways set sales of €19 billion in 2014. Again, US acquirers from , the acquisition of Rowse Honey were to the fore with groups such as Apollo, CarVal, by Valeo Foods, Cardinal Caryle’s acquisition of Kennedy Wilson and Oak Hill all acquiring various Lily O’Briens, WHW Bakeries’ acquisition of Irish assets and loan pools. Pride Bakeries and the acquisition of Nutramino by . We expect a similar level of activity to Capital Markets continue in 2015, given the highly competitive na- Irish companies are beginning to return to the capi- ture of this market. tal markets following the listing of two real estate An example of international interest in this sec- investment trusts (REITs), the Green REIT Plc and tor was the proposed -Chiquita merger in the Hibernia REIT plc, in 2013. Hibernia REIT plc, fruit and fresh produce industry, which was ulti- launched less than a year after Ireland introduced mately rejected by Chiquita shareholders in light the tax framework to facilitate REITs, raised €365 of a competing bid from Brazil’s Cutrale-Safra. million and listed on the Irish Stock Exchange and This deal would have granted US-based Chiq-

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uita Brands International access to Dublin-based uity participants to re-enter the Irish M&A market Fyffes’ 16% market share of European banana dis- in the next year. tribution - the largest on the continent - as well as allowing the combined company to control 14% of L ong term prospects the global banana market. for the Irish M&A market Another sector likely to continue its recent up- In summary, the M&A market in Ireland is mostly ward trend is in IT & Telecoms, which saw a large reflective of the Irish economy, that is it is under- going a broad and increasingly quicker recovery, an increase in growth with strong international “We believe there are real prospects investment and improving levels of domestic de- mand. We believe there are real prospects for for long-term growth in the Irish long-term growth in the Irish M&A market as M&A market as the country the country continues to attract foreign investors, as evident from the continued dominance of US continues to attract foreign investors, companies as the top acquirers into the country. This international commitment is augmented by as evident from the continued the recent rise in domestic M&A across a variety dominance of US companies as of sectors, with the number of Irish purchasers increasing in 2014. While domestic targets in re- the top acquirers into the country.” cent years have included distressed assets as part —Cian Mccourt, A&L Goodbody of bank deleveraging programmes, there are now numerous examples of investors targeting strong performing Irish companies showing prospects of amount of activity in 2014. Notable deals included continued growth. Charterhouse Capital Partners LLP’s acquisition of Another positive development looking ahead to Skillsoft Limited for €1.4 billion and the acquisition 2015 is the expected enactment of the Irish Com- of CarTrawler by a consortium including BC Part- panies Bill. This will introduce the most significant ners and Insight Venture Partners for €450 million. reform in Irish company law in 50 years, consoli- dating the existing legislation as well as a number of MOST ACTIVE Jurisdictions court judgments. Positive reforms envisaged by the Given the continued level of international interest, Bill include the establishment of an omnibus statu- it is no surprise that nine of the top ten deals in tory validation procedure for certain activities (such the first half of 2014 involved overseas acquirers. as transactions with directors, financial assistance, This highlights the positive sentiment among for- capital reductions and solvent windings up) and the eign corporates towards Ireland, with the economy introduction of a domestic merger regime for cer- improving and valuations continuing to be attrac- tain companies. When it becomes law, the Bill will tive, particularly with a weakening euro fx rate. add greater clarity to the existing Irish company The US remains the number one source of direct law framework, further enhancing Ireland’s attrac- investment. The growing political opposition to tiveness as an investment location. ■ inversion transactions by US companies did ulti- mately slow progress in the latter half of 2014, fol- Cian McCourt, Resident Partner lowing measures introduced by the US Treasury A&L Goodbody, New York Department to make inversion by US companies Email: [email protected] more difficult. However, such deals will always be Tel: +1 646 545 3395 largely driven by strategy and it is likely that US bidders will continue to look to Ireland because of A&L Goodbody the quality of Irish targets. The Chrysler Building With signs of recovery in the UK also apparent, 405 Lexington Avenue, New York 10174 we expect a number of UK trade and private eq- www.algoodbody.com/usa

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