Optimism amongst the uncertainty for NI businesses at start of 2019
Nobody can predict with any certainty what the year ahead might hold, particularly with the Brexit process seemingly so far from a clear resolution.
But looking at some of the key themes and trends experienced by Carson McDowell's corporate, banking and property teams last year does at least give us an indication of some of the issues that could come to the fore once again.
We are hearing that uncertainty around Brexit is already affecting some local businesses directly in terms of their workforce, with it becoming more difficult to retain and recruit essential workers. Management are also having to devote time to planning for uncertainty and away from their businesses, although I have some concern that the level of contingency planning happening among SMEs is still quite low.
At a local level, political uncertainty and the absence of a functioning Stormont Executive is hampering key infrastructure projects, such as North-South Interconnector. It's an essential energy infrastructure project, which Carson McDowell is advising on, to enable the island of Ireland take full advantage of the single electricity market, enhance energy of supply and deliver costs savings to the consumer - all of which will help underpin economic activity in Northern Ireland.
On a more positive note, 2018 was an extremely busy year for M&A and private equity transactional work and our pipeline for the first quarter of 2019 remains very positive.
Among the transactions our team advised on were the sale of Lagan Group's building materials business to Breedon Group Plc for over £400m; the sale of Abbey Insurance to private equity fund Capital Z Partners; the £60m private equity investment in Lowe Rental which facilitated a successful exit by MML Capital; the acquisition by SHS Group of 3V Natural Foods; the sale of Simple Power Limited to Foresight Group; and the sale of Belfast International Airport to VINCI Airports
It is hard to predict the levels of activity beyond the second quarter, but it seems inevitable that Brexit will have an impact on M&A. The most likely scenario is a slowdown in the market, though activity could accelerate again once the situation becomes clear - even if that is a no deal.
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We anticipate further growth in investment and M&A activity in the technology sector, particularly cyber security, and consolidation of certain other sectors such as financial services and professional services - for example dental and vet practices. Succession planning and refinancing of renewable energy projects will also generate corporate activity.
The continued strength of certain parts of our manufacturing sector, particularly those companies focused on the quarrying/screening equipment market, has been reflected in a number of deals, such as the development of the new CDE Global headquarters and their purchase of the former Caterpillar site in Monkstown.
In hospitality there were multiple hotel developments in Belfast, including the The Grand Central, but going into 2019 there is now more focus outside Belfast, with operators and funders looking at opportunities in South Down/The Mournes and the North Coast, such as the proposed new hotel at the Ebrington Development in Derry/Londonderry.
Carson McDowell also acted for the Northern Ireland Investment Fund with regard to The Merchant Square and that Fund is now looking at funding a number of other strategically important projects for 2019.
We do anticipate some nervousness in the market in early 2019 related to the macro-economic and political developments.
But Carson McDowell remains optimistic about the performance of the many resilient and market leading businesses in Northern Ireland and the level of investor interest in the region, and we expect pockets of continued success whatever direction the prevailing economic and political wind is blowing.