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Squeeze on bank funding likely to see a decline in the number of Irish acquisitions in 2008 – Ion Equity 

  • Squeeze on bank funding for private equity deals means trade buyers now in a stronger position
  • Banks reducing level of debt they are prepared to commit to buyouts by up to 20%
  • Fourth quarter 2007 sees 10% increase in value of M&A deals to €9.5 billion, 8% increase in number of deals to 83 

Banks and other lenders are reducing the amount of money they will lend to fund private equity and leveraged acquisitions by as much as 20% and this has put prospective trade buyers in a stronger position when it comes to making acquisitions, Ion Equity Director Joe Devine has stated. 

Writing in Ion’s M&A Tracker Survey for the fourth quarter of 2007, Devine says that private equity and other leveraged buyers accounted for some 40% of the €22 billion spent on acquisitions in 2007. 

“These buyers rely on high levels of bank debt to fund their acquisitions.  The dislocation in credit markets experienced since September 2007 is having a serious effect on these types of transactions.  Banks are reducing the level of debt they are prepared to commit to buyouts by as much as 20%.

“This places higher equity demands on leveraged buyers and puts trade buyers in a stronger position.  Accordingly we expect a decline in deal volumes in 2008 as credit markets are unlikely to fully recover until well into the year,” Devine states.

The M&A Tracker survey for the fourth quarter of 2007 shows an increase in the number of deals and their value.  The number of deals increased from 77 to 83 while the value of those deals increased from €8.6 billion to €9.5 billion.  The fourth quarter figures were distorted to a degree by the €5.7 billion acquisition of the IFSC-based bank Depfa by Hypo Real Estate, but the fourth quarter 2006 figures were also distorted by one big acquisition – the €4 billion acquisition of Houghton Mifflin by Riverdeep.

The finance sector – boosted by the Hypo/Depfa deal – accounted for more than 60% of deal value in the fourth quarter while building/construction/property accounted for more than 11% of the value of deals.  This sector, however, accounted for more than 51% of the number of individual deals in the period.  The leisure/travel sector accounted for more than 7 per cent of deal values in the fourth quarter mainly due to two big hotel acquisitions by Moran Hotels and Prem Group. 

The 10 biggest individual deals in the fourth quarter of 2007 were: 

  • Hypo Real Estate / Depfa Bank - €5,700 million
  • E.On / Airtricity North America assets - €990 million
  • Moran Hotels / Bewley Hotels - €500 million
  • Communicorp / Emap Irish radio assets - €200 million
  • Morvest (Joe Moran) / Manor Park Homebuilders  - €181 million
  • CRH / Cemex Arizona/Florida assets - €170 million
  • Prem Group / 11 hotels France/Belgium - €168 million
  • AAC Partners / Ocean Media (Ion Equity) - €153 million
  • Greenstar / Mid-America Recycling - €86 million
  • Vodafone / Perlico Communications - €80 million

For the full year, the value of deals increased more than 44% to €22.3 billion, although the number of deals fell from 250 in 2006 to 240 in 2007.  Three large deals in 2007 contributed to the big increase in deal value – the €4 billion Riverdeep/Houghton Mifflin deal, the €1.6 billion Quinlan Private/Marriott Hotels deal and the €5.7 billion Hypo Real Estate/Depfa deal.


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