Ireland’s mergers and acquisitions (M&A) landscape has been evolving, reflecting broader trends across Europe but with some distinctive local factors. While overall M&A volume in Ireland has seen a year-on-year decline, the value of deals has risen, mirroring trends seen across the EMEA region. Anya Cummins, Laura Dillon, and Robert Maloney Derham recently met at Datasite’s Dealmakers Dialogues Dublin to discuss the factors that are positioning Ireland as a unique outlier in the global M&A market as well as the challenges that both buyers and sellers will need to navigate to capitalize on the opportunities ahead.

A Surge in Deal Value Amid Economic Resilience

One of the most notable recent trends in Ireland’s M&A activity is the significant rise in deal value. In the first half of 2024, despite a dip in M&A volume, the value of M&A deals in Ireland skyrocketed by some 200% compared to the same period the previous year. Much of this can be attributed to the strength of the Irish economy, which has shown remarkable resilience in comparison to major markets like the UK and Germany.

Ireland’s strong economic fundamentals are a major driver behind this trend. Employment is at an all-time high and the country has navigated recent economic turbulence better than many of its European counterparts. This has boosted investor confidence, with lower interest rates also playing a significant role in making Ireland a more attractive investment destination. Unlike other countries, which have struggled with stagnation, Ireland’s positive economic outlook has drawn interest from both corporate and private equity investors alike.

Private Equity Growth Fuels M&A Expansion

Private equity (PE) is another critical factor driving M&A in Ireland. Historically, Ireland’s PE market was underdeveloped compared to the UK and the US. However, in the past 15 years, there has been a marked shift, with PE accounting for roughly 20% of deals there this year. The increasing willingness of Irish businesses, including family-run firms, to entertain external investment has opened new doors for growth.

The growing presence of PE in the Irish market is also linked to the trend of succession planning. Many family-owned businesses are now at a stage where they are considering external investment to facilitate growth or to prepare for generational handovers. As these businesses seek to expand internationally, PE offers a pathway for both capital and strategic partnerships.

Internationalization and the US-UK Deal Corridor

Ireland’s international outlook is another key factor underpinning the surge in M&A activity. Given the small size of the domestic market, Irish businesses tend to internationalize early in their growth cycle, which makes them particularly attractive to foreign investors. The US-Ireland and UK-Ireland deal corridors remain highly active, with PE and corporate investors viewing Irish businesses as valuable assets due to their established international presence.

In contrast, businesses in markets like the UK are often more domestically focused, which poses greater risk in times of economic uncertainty. Ireland’s exposure to multiple international markets, coupled with the high quality of its management teams, makes its companies resilient and appealing for large-cap funds seeking cross-border investments. This is particularly true in sectors like technology, healthcare, and pharmaceuticals, where Irish businesses have successfully scaled up to serve both domestic and global markets.

Sectoral Drivers: Technology, Healthcare, and Green Investments

Several sectors stand out as strong drivers of M&A activity in Ireland, notably technology, media, and telecommunications (TMT), healthcare, and green energy. The rise of tech ecosystems, especially in Dublin, where multinational giants like Google, Microsoft, and LinkedIn have established a foothold, has created fertile ground for M&A. Many mid-market deals involve tech spin-offs or businesses that have emerged from these ecosystems, seeking PE funding for further expansion.

Similarly, healthcare and life sciences are booming sectors for M&A, with Irish companies ranging from generic pharmaceuticals to medtech services attracting significant attention. The intersection of technology with traditional sectors is blurring industry lines, making many businesses hybrid operations that leverage tech solutions to drive growth.

Green energy and ESG-focused investments are also on the rise, reflecting global trends. Investors are increasingly targeting companies that contribute to sustainability initiatives, and Ireland’s growing green energy sector could play a central role in future M&A activity.

Tax Incentives and Competitive Advantages

Ireland’s tax regime has long been a draw for multinational companies and investors. While the country’s corporate tax rate is set to increase from 12.5% to 15%, this is not expected to dampen investment. In fact, many view the tax normalization as a positive development, likely to generate additional revenue for the state while maintaining Ireland’s overall attractiveness as a tax-efficient jurisdiction.

The presence of multinational tech companies in Ireland has also generated secondary benefits for the local economy. These companies not only create direct employment but also fuel the growth of local service providers and suppliers, many of which become acquisition targets as they scale.

Due Diligence and Slower Deal Processes

However, while the outlook for M&A in Ireland remains positive, there are challenges to consider. The diligence process is becoming more extensive, with buyers demanding more detailed data and greater transparency. This has led to longer deal timelines and more complex transaction structures, such as deferred payments or earn-outs. The increasing focus on quality over haste in dealmaking reflects a shift in market dynamics, with both buyers and sellers taking a more cautious approach to transactions.