Arcapita’s acquisition of power firm Viridian is indicative of an increasingly international flavour to deal making in Northern Ireland. This is underpinned by an economy that has been expanding for almost four years.
Arcapita’s acquisition of power firm Viridian is indicative of an increasingly international flavour to deal making in Northern Ireland.
For the shareholders of Belfast-based electricity utility Viridian Group, it was an offer too good to refuse. When Bahrain-based investment firm Arcapita Bank offered $4.2 billion [£2.1 billion] for the company, they voted overwhelmingly to accept.
The deal, completed in December through Arcapita’s ElectricInvest Acquisitions vehicle, is Arcapita’s largest investment to date. The company was attracted to Viridian by its revenue streams and potential to grow in the coming years.
Viridian’s regulated arm provides power to 800,000 homes and businesses in Northern Ireland. Its unregulated division focuses on power generation in the Irish Republic and a third division provides power-related services.
“Viridian… offers steady and predictable earnings from the regulated side of the business,” said Atif A. Abdulmalik, CEO of Arcapita. “Furthermore, the predicted growth in demand for electricity throughout Ireland should present substantial opportunities in the unregulated side of the business, and Viridian is well placed to grow market share significantly.”
But it is not only megadeals on the international agenda, overseas businesses are also targeting smaller Northern Irish businesses. For example, in November 2006, US-based health technology developer PerkinElmer Inc acquired rival Avalon Instruments, which is based in Belfast, for an undisclosed sum.
While overseas acquirers are looking amorously at companies in the province, Northern Irish businesses are also targeting international expansion through M&As. For example, retail group Ulster Stores bought Jersey-based department store operator A de Gruchy Stores Group in November 2006 for an undisclosed sum.
Coleraine-based Ulster Stores acquired de Grucy from Merchant Retail Group plc. “We bought de Gruchy because we admired the store, liked how it traded and believed that it would be an excellent ‘fit’ within our existing business group,” said Ulster Stores’ managing director, Neville Moore.
Domestic M&A activity has also been healthy at the small to medium end of the market. Deals like construction materials and contracting services provider Northstone’s acquisition of Lurgan-based rival Salmor Industries for an undisclosed sum in late 2006 were the norm.
But other businesses have been frustrated in their M&A strategy. In February, media firm UTV plc ended merger talks with rival SMG plc, ending a chase for Belfast-based UTV dating back to August 2006.
After initially pulling out in September due to Glasgow-based SMG’s poor interim results, UTV had returned to the negotiating table in December. This time, UTV pulled the plug because of changes in SMG’s board and differing views over the level of SMG’s pension liabilities, but UTV reserved the right to make another offer.
Meanwhile, other businesses have focused on organic growth. For example, recruitment business Grafton, which already has offices in 18 countries around the world, plans to open a further 17 offices in the next year in Europe, Asia and South America.
From its beginnings in Belfast in the early 1980s, Grafton has developed into a multi-national group turning over some £110 million and posting gross profits of about £37 million for the past year.
In addition, 18 Northern Irish IT companies travelled to the US in March to attend the FOSE exhibition in Washington in a bid to break into the lucrative US government agencies market.
The trip, part of an Invest Northern Ireland trade mission, helped companies such as Core Systems, which specialises in developing biometric identity software, to present their products to an audience worth about $300 billion annually.
Healthy economy
The desire to grow internationally by acquisition or organically is indicative of the confidence among businesses in the province, and this is based on its healthy economy.
Indeed, in economic terms Northern Ireland is outperforming the majority of the UK and Eire. In the three months to February, only the Southeast and Southwest of England performed better than the province in terms of increasing output/business activity, according to the Ulster Bank PMI Report for Northern Ireland.
While the rate of growth in February was down slightly on the spike of January, it nevertheless was still well above the UK average. The Northern Irish economy has now grown for 47 consecutive months and shows little sign of contracting in the near future.
This was attributed anecdotally to strong demand and robust market conditions, with the construction, manufacturing and service sectors performing particularly well. However, the retail sector posted a slight decline in activity and only marginal growth.
Not only this, but Northern Irish managers recruited more employees than anywhere else in the UK and Eire in the same three month period, mainly because of the strain the increased new business was placing on the existing workforce.
