The Emerald Isle was one of the first European economies to fall into recession, but this doesn’t mean that its dealmakers are sitting on their hands. Mark Dunne reports

Some people might say Chas Taylor and Paul Gilson should be taking it easy. After selling their medical device company MedNova to pharmaceutical giant Abbott Laboratories in 2005 they could just sit back, relax and enjoy the fruits of their labour. But that simply isn’t their style.

The Galway-based businessmen were already looking for the next opportunity and discovered that there was a lack of technical support for patients with blood clots in their lungs. They decided to establish Novate Medical to fill the gap. They had a business plan, experience and expertise, but lacked the funding.

Their strong track record quickly attracted potential investors, and the company managed to raise €4 million (£3.1 million) from a consortium of investors co-led by ACT Venture Capital and Seroba BioVentures, with Enterprise Ireland also participating.

Novate was a typical investment for ACT – a European early-stage technology company serving a global market and needing less than €15 million. The directors saw the business as a sound investment, however, the deal has become something of a low point for ACT. The transaction closed in September 2007 and it has not made a primary deal since.

“There isn’t that much happening in the Irish market at present,” ACT partner Walter Hobbs says. “It is difficult to get things done these days.”

Hobbs’ precis of the Irish deal market appears accurate. In the first nine months of the year only 59 deals worth up to €250 million closed against 95 during the same period in 2007, according to M&A analyst Zephyr.

A different view

During ACT’s investment in Novate, Taylor and Gilson were advised by law firm LK Shields. John Olden, one of its Dublin-based partners, admits that times are tough for Irish dealmakers due to economic problems, but says there are still transactions to be worked.

“We have more than held our own this year and have had a decent amount of work,” he says. “We are currently seeing strategic acquisitions by trade and industry participants, who were perhaps priced out a few years ago when there was more money around for leveraged transactions.”

Some of these deals have included acting for the management in a buyout of Ireland’s largest pork processing company from Glanbia Plc, and advising Oxford Aviation on its acquisition of Parc Aviation. The firm has also recently added the shareholders of wireless telecom site manager Vilicom to its client list after advising them on the sale of the business to Shared Access.

Despite these successes, these deals did not run as smoothly as they once would have done.

“What we have seen from the beginning of the year is that transactions are that bit slower as it is taking longer to get approval from credit committees,” Olden says. “Even when they approve them, there are increased terms or conditions that one has to go through before getting the cash and that wouldn’t have been the case two-and-half-years ago.”

Shrinking assets

According to Zephyr’s figures, values have also suffered this year. By the end of September, a disclosed €2.85 billion was spent compared with €4.1 million 12 months previously.

Hobbs believes that it was inevitable that values would decline due to the country’s current economic problems. “The natural consequence of the present credit crisis, both in Ireland and also internationally, is that enterprise values and EBITDA multiples have dropped.”

Olden agrees, claiming that the market in Ireland is similar to London and North America in that the climate for leveraged buyouts has changed. “We are seeing more trade transactions and deals where the non-bank funded components are being financed by the purchaser out of cashflow.

“Coming in and trying to do something on 85-90 per cent bank gearing is not going to happen in London, or anywhere else,” he says.

He believes confidence in the deal market could soon return following the Irish government’s announcement that they will be guaranteeing bank debt. “Banks will start to look with greater comfort or with increased enthusiasm at lending than they have in the past three to six months. We may see a degree of confidence come back into the banking market and greater availability of funds.”

While Olden is optimistic, Hobbs admits to being worried about the future. “I have never seen anything like this before. I don’t understand what is going on, I don’t think anyone does. Nothing is going to come right until the banks are fully stabilised and fully re-capitalised.

“We are in the midst of one hell of a crisis, so we’ll have to batten down the hatches and see what it takes to get to the bottom of it,” he adds. “It’s far more serious than the dotcom blow up.”

DONE DEALS

Noonan Services
The senior management team at contract cleaning and facilities management company Noonan Services bought the company for €90 million in August 2008. The eight-strong team acquired a minority stake in the company from founder Noel Noonan and his family. The deal was backed by private equity firm Alchemy Partners, which has become the company’s controlling shareholder.

Orangold
Gerry Rabbitte, a former controlling shareholder of Galway Bay FM, spent €10 million in May buying Highland Radio. He acquired the business through his Orangold company from radio investment specialist Communicorp. The County Donegal station was sold a year after it was bought from Emap as part of a group of stations for €200 million.

Apex Fire
Moyne Roberts (Ireland), a fire protection equipment manufacturer, strengthened its operations in April with the acquisition of a fire protection company. It bought Apex Fire for an undisclosed sum in a deal that is believed to be worth millions of euros. The acquired company has been trading for more than three decades and today has offices in Dublin and Cork.

Hibernian Group Plc
Hibernian Group Plc, Ireland’s largest insurer, entered the health insurance market in April with the acquisition of a controlling stake in VIVAS. The group bought 70 per cent of the business for €45 million from International Investment Underwriting and VIVAS’ management. Allied Irish Banks Plc continues to hold 30 per cent of the business.