Recent Trends in Corporate Finance in Ireland
Peter Crowley
Chief Executive, IBI Corporate Finance
30 March 2006
Contents
I.
Introduction
II.
Recent Activity in the Irish Market
III.
Trends in the Irish Capital Markets
IV. Looking to the Future
V.
Summary
VI. About IBI
2
Section I
Introduction
Introduction
 Just completed my 6th year as CEO of IBI – a period characterised
by unprecedented levels of market activity and record fee levels
 In addition to the historic strength in our plc franchise, a growing
driver of activity has been the emergence of a healthy mid-market in
private company activity. Ted Webb leads our activities in that area.
 Activity driven by all the factors evident in the UK market together
with specific local factors in particular the confidence generated by
14/15 years of uninterrupted economic growth
4
Key Drivers
Irish Economy
M & A Activity
 Low corporation tax rates
 Supportive market conditions
 Low CGT
 Low interest rates
 Strength of property market
 Debt market liquidity and
aggressive local banking
competition
 Period of uninterrupted economic
growth
 Availability of private equity
 Educated labour force
 High net-worth investors
 International trade/open economy
 Ability to form syndicates
 Strong consumer demand
(boosted by SSIA spend)
 Strong competition for quality
assets
 Boost from immigrant population
 Strong management teams
 Succession and estate planning
 Market consolidation
 Diversification
5
Section II
Recent Activity in the Irish Market
Recent Activity in the Irish Market
ISEQ
M&A Activity (value)
8,000
€bn
18.0
7,364
7,000
6,000
15.6
16.0
14.0
5,723
6,198
5,707
12.0
5,000
10.7
4,921
10.3
10.0
9.9
4,000
8.3
3,995
8.0
7.7
3,000
6.0
2,000
4.0
1,000
2.0
0
0.0
2000
Esat Telecom
Elan
AerFi Group
CRH
Hibernian Group
Hamburg Airport
Ocean Communications
Chase de Vere
2001
Eircell
Eircom
Esat Digfone
IN&M
Greencore
TSB
ICC
Golden Vale
2002
Jefferson Smurfit
Green Property
Elan
Musgraves
First Rate Travel
BWG Foods
BIAM
Golden Pages
2003
Allfirst
Elan
CRH
Riverdeep
Arnotts
Dunloe Ewart
Jefferson Smurfit
Grafton Group
2004
The Savoy Group
First Active
Clondalkin Group
CRH
Tullow Oil
Kerry Group
Jarvis Hotels
Waterford Wedgewood
2005
Smurfit/Kappa
Danske Bank
Jurys Hotels
Superquinn
Meteor
CRH
The Savoy Group
Kingspan
7
Deal Volumes/Type
No of Deals
No. of Deals
160
140
26
120
100
Private Equity / MBO
Trade Sale
80
60
27
17
8
16
117
5
88
87
40
55
69
57
20
0
2000




2001
2002
2003
2004
2005
Upward trend in volume of deal flow from 2000 to 2004 (140% increase overall)
Value of deals continued to rise in 2005 despite lower volume
Growing frequency of smaller but still substantial deals now being undertaken (69% of 2005
disclosed deals valued at less than €50m)
Private equity/MBO deals now form a much more significant portion of the Irish deal landscape –
23% of deals in 2005 compared to 8% in 2000
8
Corporate Finance Activity by Sector
2005 By Volume
4%
5%
19%
10%
14%
9%
9%
14%
2004 By Volume 5%
 IT and Telecoms sector showing
a strong recovery (now up to
14% of deals) after the dot.com
crash in the early 2000s
7%
9%
5%
17%
20%
9%
9%
10%
7%
Media & Publishing
Construction & Property
Retail & Industrial
 The Industrial and Retail sector
accounted for the highest
proportion of deals in 2005
(19%), replacing Food and
Food Services (down from 20%
in 2004 to 10%)
 The Financial Services sector is
a continuing driver of deal
activity (14% of deals) followed
by Support Services & Logistics
and Leisure & Travel (both at
9%)
10%
8%
Food & Food Services
Health & Pharma
Oil, Gas & Exploration
IT & Telecoms
Financial Services
Support Services & Logistics
Leisure & Travel
9
Deal Types: Cross-Border V Domestic
No of Deals
No. of Deals
160
140
120
46
100
31
32
80
60
7
Domestic
Cross border
12
5
97
40
70
55
61
72
84
20
0
2000



2001
2002
2003
2004
2005
Due to the open nature of the Irish economy, cross-border deals form the vast majority of transactions
in Ireland (74% of deals in 2005). Growth in in-bound activity from 2003 on, indicates strategic
buyers comfortable with economic outlook
However, the volume and proportion of domestic and outward bound deals is on the increase with 30
such transactions in 2005 (or 26%), compared to only five in 2000 (8% of total deal activity)
This reflects the increasing scale of Irish companies and the enhanced financial resources available
to them
10
Section III
Trends in Capital Markets
Overseas Strategic Acquirers Active in Irish Market
 Strategic overseas buyers back in the landscape, attracted by the
impressive Irish growth rates; examples include the following:
Company
Sector
Emap, UK
Media
Johnston Press, UK
Media
BT Group, UK
IT & Telecoms
Danske Bank, Denmark
Financial Services
Landsbanki, Iceland
Financial Services
Imprint, UK
Support Services
Stericycle, USA
Waste
Wolseley, UK
Construction
VWR International, USA
Healthcare
Smiths Group, UK
Industrial & Retail
UTV, UK
Media
 Certain media driven concerns about overheating of the Irish economy
have been allayed for Irish investors
12
Irish Companies Active Overseas
 Irish companies are increasingly active in overseas markets; prominent examples
include the following:
Company
Sector(s)
CRH
Construction & Industrial
Kerry Group
Food & Foodservices
Bank of Ireland
Financial Services
Grafton Group
Construction & Industrial
Tullow Oil
Oil, Gas & Exploration
Greencore Group
Food & Foodservices
Smurfit Kappa Group
Industrial
Quinn Group
Industrial, Financial Services & Leisure
DCC
Healthcare, Industrial, IT, Food & Oil
United Drug
Healthcare
Kingspan
Construction & Industrial
Alphyra
Electronic Payment Processing
Glen Dimplex
Industrial
13
Emergence of HNW Investors as Nimble Aggressive Buyers
 Irish HNWs have become key players in overseas property transactions and now
are also beginning to diversify into non-property related transactions
Acquirer
Property
Quinlan Private
Quinlan Private
Sloane Capital
Quinn Group
Sloane Capital
BOI Private Banking
Warren Private Clients
BOI Private Banking
BOI Private Banking
Non-property
Kayterm
Fruitfield
Barry Family
Longhill Investments
Select Retail Holdings
Target
The Estate
The Savoy Hotel Group
Standard Chartered Bank HQ
The Belfry Hotel & Golf Club
Unilever HQ
IT Tower, Brussels
Goldman Sachs Building, Fleet St
Cité de Retiro, Paris
Stuten 12, Stockholm
Jarvis Hotels
Nestlé Ireland
Batchelors
Maybin Support Services
Superquinn
14
International Private Equity regards Ireland as a 2nd Home Market
 The following is a selection of private equity firms who have invested in Ireland:
Madison Dearborn
Merrill Lynch
Summit Partners
Montague
3i
HG
Graphite
Barclays
BC Partners
Bridgepoint
Warburg Pincus
Electra
Cinven
Providence
Babcock & Brown
Permira
Alchemy
Legal & General
15
Steady stream of Public to Private Transactions
 There has been a relatively high number of take private transactions in
Ireland in recent years, notable examples of which include:
Target
Sector
Value
Jurys Doyle
Leisure
€1.06bn
Athlone Extrusions
Industrial
€55m
Alphyra
IT and Telecoms
€93m
Arnotts
Retail
€255m
Sherry Fitzgerald
Real Estate
€25m
Riverdeep
IT and Telecoms
€320m
Dunloe Ewart
Building & Construction
€197m
Green Property
Building & Construction
€1.05bn
Jefferson Smurfit
Print & Paper
€3.6bn
16
Trends in Capital Markets
Company
Mkt Cap
(€bn)
AIB
7.3
BoI
7.0
Elan
4.5
CRH
4.0
Smurfit Group
2.7
Irish Life
1.6
Kerry Group
1.6
Independent News
& Media
1.2
AWG
1.0
NIE
1.1
Company
Mkt Cap
(€bn)
Elan
17.5
AIB
11.5
BoI
10.5
CRH
10.3
Ryanair
5.1
IL&P
3.2
Smurfit Group
2.7
Kerry Group
2.5
Anglo Irish
1.3
Independent
News & Media
1.2
Company
AIB
CRH
BoI
Anglo
Ryanair
Elan
IL&P
Kerry Group
Grafton
Eircom
Mkt Cap
(€bn)
15.7
13.3
12.9
8.8
6.4
4.9
4.7
3.5
2.2
2.1
Greater Concentration of Top 10 Companies within ISEQ
17
Trends in Capital Markets
ISEQ Index
90.0%
81.7%
80.0%
78.5%
70.0%
68.4%
Top Ten as % of Total Index
60.0%
Financial stocks as % of Total
50.0%
45.9%
40.0%
40.4%
34.0%
30.0%
Dec '97
Dec-01
Dec '05
Re-emergence of Concentration on Financial Stocks
18
Trends in Capital Markets
Movement In ISEQ Constituents
30
20
21
10
7
0
1997-2001
2001-2005
Leavers
Joiners
-10
-28
-34
-20
-30
-40
Key Leavers
Key Leavers
ESAT Telecom
Heitons
Golden Vale
Green Property
ICC Bank
Arnotts
Jones Group
Jefferson Smurfit
Clondalkin
Group
Jurys Doyle
Growth in Net Leavers from the ISE
19
Trends in Capital Markets
 A number of key trends are noticeable in the ISEQ Index in recent
years despite growth in the overall index:
 Decrease in the number of listed companies
 A general increase in concentration with the top 10 companies now
accounting for c. 80% of the overall market cap of the index
 Steady stream of take privates has disimproved spread of exposure
for investors to the Irish economic story. Financials now account for
c. 45% of total index
 AIM/IEX emerging as a meaningful source of activity and funding
 Now 33 Irish companies on AIM
20
Section IV
Looking to the Future
Likely Active Sectors
 Healthcare – driven by infrastructure deficit
 Waste / Environmental – consolidation and new technologies
 Media / New Internet – impacted by global consolidation
 Financial Services – new entrants and disintermediation
 Business Services – outsourcing
 Retail – consolidation of local operators
22
HNW’s to emerge as aggressive non-property investors
 Need to diversify from property exposure
 Desire for return (and increased interest rates) will focus investors on
benefits of equity risk premium in broader corporate deals
 Increased sophistication of key players
 Wall of liquidity – No repeat of previous boom/bust cycle
 High confidence levels and ability to move quickly will give them an edge
23
Crossroads for the ISE?
 Ongoing trend of public to privates
 Apart from Aer Lingus, few new entrants - possibly Airtricity, Smurfit Kappa
in time
 Flow of small companies onto IEX/AIM offers some hope
 Further concentration of index in the financials not healthy
 Position in global exchange consolidation as yet unclear
24
Future Trends / Rules
 Irish economic backdrop to remain positive - favour “soft landing” view with
low level of accompanying indigestion
 Levels of M & A / market activity to remain high – further departures from
ISE likely driven by private equity
 Biggest potential risk (although limited) is a series of highly levaraged
defaults followed by a debt liquidity squeeze
 Modest levels of interest rate increases not likely to dampen activity unduly
 A drift towards labour market inflexibility through embracing “EuropeanStyle” labour laws would cause problems for inward investment
 Global liquidity generally and particularly high levels of local market liquidity
will continue to drive strong demand/competition for assets
25
Section V
Summary
Summary
 Irish Stock Exchange at an all-time high
 Value of deal activity in the market likely to continue at historically high
levels
 Ireland is still the fastest-growing economy in the EU, although
infrastructure deficiencies and emerging risk of lack of competitiveness
remain a concern
 Concerns that the Irish economy was overheating have disappeared for
international strategic acquirers
 Certain sectors remain particularly buoyant, e.g. healthcare, Media/IT,
financial services, outsourcing, waste/alternate technologies
 Increasing number of overseas financial investors/private equity players
looking at Ireland for investment opportunities
 Irish high net-worth investors looking abroad for property underpinned
opportunities in addition to seeking to diversify away from property
investments into trading businesses
 Global liquidity equally evident as a market driver in Ireland assisted by
particularly high levels of local investor liquidity buoyed by business
confidence
The Future Remains Bright
27
Section VI
About IBI
Introduction to IBI
 IBI is Ireland’s longest-standing corporate finance house with 40 years’ experience in
the Irish market
 IBI is an independent, wholly-owned subsidiary of Bank of Ireland – Market Cap c.€15
billion
 IBI has consistently been ranked the leading corporate finance adviser in Ireland and
has advised more companies than any other Irish adviser
 Only specialist CF adviser operating on a 32 country basis, North and South
 We have significantly expanded our private company/client activities in recent years –
seek to bring our public company ethos to a broader range of clients
 IBI’s team of 23 experienced professionals has an unparalleled long-term track record
in advising on a wide range of complex public and private transactions
29
Introduction to IBI
IBI is the leading Irish Corporate Finance house having consistently advised
on more transactions in the Irish market than any other player
2005
2004
2003
2002
Rated No. 1 Irish
Corporate Finance
Advisor
Rated No. 2 Irish
Corporate Finance
Advisor
Rated No. 1 Irish
Corporate Finance
Advisor
Rated No. 1 Irish
Corporate Finance
Advisor
" IBI Corporate Finance was the Merger and Acquisitions adviser
with the most deals under its belt last year. It was involved in
fourteen deals with more than €1.7bn, according to mergers &
acquisition intelligence source, Mergermarket"
(RTE Radio, 6 January 2006)
No. 1 Adviser in Irish transactions
30
IBI Credentials – Transaction Experience
“Sell-Side”/
Public Offers
Take-overs &
Buyouts
IPO
Govt/Semi-State
Private Equity
Unrivalled track record of sound advice in high-profile transactions
31
Sample Public Company Deals
Adviser to Jurys Doyle
Hotel Group plc on the
€1.25bn offer by JDH
Acquisitions plc
Adviser to Bank of
Ireland Group on its
US$184m acquisition of
71.5% of Guggenheim
Alternative Asset
Management
Adviser to Heiton Group
plc on the €353m
recommended offer by
Grafton Group plc
Acted for Unidare plc in
relation to the €55m
Class 1 disposal of
Daalderop BV, capital
distribution and related
party transaction
Adviser to Green
Property plc on the
€1.05bn recommended
offer by Rodinheights Ltd
Adviser to Jurys Doyle
Hotel Group plc on the
€260m Class 1 disposal
of the Jurys Ballsbridge
Hotel, the Towers and
the Berkeley Court
apartments to Padholme
Acted as joint lead
manager of the C&C
Group plc €398m Global
Offer and listing on the
Irish and London Stock
Exchanges
Adviser to Kayterm plc
on the Stg£159m
recommended offer for
Jarvis Hotels plc
Adviser to the
Independent Committee
of the Board of Arnotts
plc on the €257.3m
recommended offer by
Nesbitt Acquisitions Ltd
Adviser to Renlin Ltd, the
management team's
bidding vehicle, on the
€25.8m MBO of Sherry
FitzGerald Group plc
Adviser to Ryanair plc on
its €379.8m flotation on
Dublin and NASDAQ
Stock Exchanges
Adviser to the
Independent Directors of
the Board of Jefferson
Smurfit Group plc on the
€3.6bn takeover by
Madison Dearborn
Partners
Adviser to Murryhill Ltd
on its Stg£35.2m
recommended cash offer
for PGA European Tour
Courses plc
Adviser to e Island plc on
its €3bn offer for eircom
plc
Adviser to Golden Vale
plc on the €253m
recommended offer by
Kerry Group plc
32
Sample Private Company Deals
Adviser to Kandel Ltd on
its €90m disposal to
Investcorp Techhnology
Ventures & InfoNXX
Adviser to Eason
Electronic Ltd on its
disposal to Alphyra
Group plc
Adviser to SHS Group
Ltd on its Stg£36.7m
recommended offer for
Merrydown plc
Adviser to Donegal
Highland Radio Ltd on its
€7m disposal to Scottish
Radio Holdings plc/Emap
plc
Adviser to Sigma
Communications Group
Ltd on its €29.5m
disposal of Sigma
Wireless Technologies
Ltd to US-based PCTEL
Inc
Adviser to Premier Group
on its €9m acquisition of
Nigel Lynn Associates
Ltd
Adviser to CR2 on its
management buy-out
and private equity
fundraising
Adviser to Brindley Media
Group on its disposal to
Aegis Group plc
Adviser to Kish Media Ltd
(Channel 6) in a private
equity fundraising of
€14m
Adviser to Portmarnock
Hotel & Golf Links Ltd on
its €70m disposal to
Capel Ltd
Adviser to Bank of
Scotland (Ireland) Ltd
and Barry's Tea on the
€62m acquisition of
Batchelors
Adviser to Treaty Radio
Ltd on its €15.7m
acquisition by UTV plc
Adviser to City Hopper
Airports Ltd on the
disposal of
Wolverhampton Airport
Ltd to a consortium led
by Mar Properties Ltd
Sale of Newhill Ltd and
co-investment by
Newhill's shareholders in
the Electra Partners
Europe-backed
acquisition of BWG,
valued at €321m
Advisers to management
on the buyout of Maybin
Support Services on the
acquistion by Longhill
Investment Ltd
33