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Dealmakers expect more mergers and acquisitions in 2022, says advisory firm

Technology and healthcare tipped to be the busiest sectors for deals


Optimistic: Russell Smyth, head of deal advisory at KPMG in Northern Ireland. Credit: Darren Kidd

Optimistic: Russell Smyth, head of deal advisory at KPMG in Northern Ireland. Credit: Darren Kidd

Optimistic: Russell Smyth, head of deal advisory at KPMG in Northern Ireland. Credit: Darren Kidd

Nearly 60% of dealmakers on the island of Ireland expect more mergers and acquisitions (M&A) to take place this year compared to 2021, according to a report.

And the annual M&A outlook survey from business advisory firm KPMG predicted that 2022 would be a sellers’ market as competition stiffens among buyers.

Only 1% of the 100 advisors surveyed expected fewer deals to take place this year, signalling that business confidence is high despite long periods of Covid-19 restrictions.

Skills gaps were described as the main threat to deal activity — but only one in 10 considered Brexit would be a threat to transactions. Last year had been a record year for deals, with landmark transactions such as the sale of Euro Auctions in Co Tyrone to Ritchie Bros in Canada. The value of deals here had reached nearly £3.1bn in the first nine months of the year, according to Experian.

But even that record year will be surpassed, KPMG said, with 73% of advisors expecting deal multiples to increase. And healthcare and technology were tipped to be the busiest sectors for deals.

Financial buyers such as private equity were expected to lead most of the activity, rather than strategic buyers.

One of the biggest equity deals of last year was an investment in Londonderry e-learning company Learning Pool by global investment firm Marlin Equity Partners.

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Russell Smyth, head of deal advisory at KPMG in Northern Ireland, said: “After a stellar 2021, Northern Ireland’s M&A market looks set to continue that trend in 2022.

“Dealmakers are optimistic of a continued uptick in deal volumes while sellers have raised their value expectations as buyers chase quality assets.

“Strategic investors are expected to remain prominent on the buy side, but it will be interesting to see how the expected increase in activity from financial buyers impacts the market in the coming months.

“Private equity is still flush with funding and will likely retain a competitive edge as 2022 unfolds.”

He said the green agenda would continue to grow in importance in the M&A market.

“Embedded sustainability is now demanded by investors, shareholders and regulatory bodies and those companies that fail to demonstrate that focus will be left behind.”

Chris Donnelly, KPMG director of deal advisory, added: “For those business owners considering a sale, ensuring a quality team and pipeline of talent is in place will be key as our survey shows the race for skills is one of the biggest challenges facing companies at present.

“Meanwhile, it is clear that funders — both traditional and non-bank — are keen to support the Northern Ireland M&A market on the back of robust fundamentals while interest rates will be one to watch for 2022 with any significant rises likely to temper buyer appetite.”

At 83%, a significant majority of those surveyed by KPMG indicated that they intend to pursue M&A opportunities in 2022.

And almost three in four respondents expected deal pricing to increase in 2022. The skills gap was regarded as a risk factor for deals for 39% of those surveyed.

However, one in four had concerns about inflation, while political change was a worry for 15%. And around one in 10 felt that rising interest rates could inhibit deal activity.

At 92%, nearly all were intending to factor in sustainability in their strategies for the year.