A Growth Trend

Author:Mr Patrick Quinlan and Sinead Garnett
Profession:Maples and Calder

Overall Irish M&A activity showed some positive signs in 2012. While deal data suggests that the number of transactions did not change drastically, the value of transactions for the year increased on 2011. This has helped to create a positive expectation for 2013, with market participants cautiously optimistic that activity will increase. Generally, the Irish economy looks to be on a stronger footing than this time last year. It is estimated that Irish GDP grew by 0.5% in 2012 and growth in GDP of 1-1.5% is forecast for 2013, which compares favourably to the rest of the eurozone. 2012 also saw large flows of foreign direct investment into the country and strong export sector performance with the value of Irish exports increasing to €92 billion ($120.2 billion) in 2012, helped by increasingly competitive market conditions in Ireland. Certain trends appear to be emerging in Ireland on analysis of the recorded M&A activity for 2012 and there are a number of areas and sectors where, based on those trends, continued growth is expected in 2013.

Deleveraging of non-core assets of financial institutions

In 2012, financial institutions in Ireland continued to shrink their balance sheets through deleveraging of non-core assets and that trend is likely to continue through 2013. The biggest deal of 2012 in this regard was the acquisition by Sumitomo Mitsui Financial Group of RBS Aviation Capital from The Royal Bank of Scotland in a €5.8 billion deal. The sale generated significant interest, with a number of bidders involved in the process, including China Development Bank and Wells Fargo.

Many of the domestic Irish financial institutions have already disposed of overseas subsidiaries and businesses as well as certain Irish assets, such as insurance and financial services subsidiaries that are regarded as non-core. There are, however, still significant opportunities in terms of non-core assets to be acquired, with the focus now turning to the disposal of Irish loan portfolios and distressed Irish property assets. There is considerable international interest in Irish loan portfolios and property assets from private equity funds, sovereign wealth funds and other specialist investors, as evidenced by Apollo's acquisition of both the MNBA Irish credit card receivables book from Bank of America and a €1.8 billion Irish loan portfolio from Lloyds Banking Group. A number of transactions involving loan portfolios and distressed property assets are expected in 2013. The Irish Bank Resolution Corporation (IBRC; previously Anglo Irish Bank) was placed in special liquidation in early February 2013 holding €16 billion in outstanding loans, which the liquidator will seek to dispose of in the coming months. In particular, the sale of a €2 billion loan book, called Project Delta, prepared by IBRC before being placed in special liquidation, is under consideration by the liquidator. Given the work already put in by IBRC on the project before the liquidator's appointment, it is likely that he may seek to dispose of the portfolio in the near term. It is anticipated that any loans not disposed of by August 2013 will be transferred to the National Asset Management Agency (Nama), Ireland's bad bank structure which holds land and development and associated loans acquired from bailed-out Irish financial institutions. Nama itself has indicated that its sales target for 2013 is between €3 billion and €3.5 billion, which will have to be achieved either through sales of loans/portfolios of loans or through sales of the underlying assets.

Food and agriculture

The food and agriculture sector has been a big success story for Ireland in 2012, contributing9 billionin exports for the year. Ireland's reputation for having a high level of food safety...

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