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Corporate: Strong Irish M&A Deal Flow Continues Through 2019

03 December 2019

Continuing upward trend in the use of W&I insurance in M&A transactions

The proliferation of underwriters in the market for warranty and indemnity (W&I) insurance has continued apace recently with new entrants such as Acquinex, Vale and Themis now offering cover in the UK and Ireland. It is also worth noting that Hunter George, a prominent and active W&I underwriter, has rebranded as RSG Transactional Risks Europe.

Generally, premium prices and policy excesses for W&I policies are remaining competitive. Many insurers are still offering a ‘nil excess’ for policies covering risk in respect of real estate and renewable assets, thereby enabling the insured party to claim for the ‘first euro’ under the policy without itself having to suffer an amount of loss up to the excess.

The W&I market has also been maturing to provide cover for a variety of tax risks with the increasing availability of bespoke tax indemnity policies. However, insurers now appear to be willing to wrap low quantum tax risks into W&I policies for additional premiums that are much lower than previously experienced.

See here for our most recent article on the maturity of W&I Insurance and enhancements in M&A Transactions.

M&A trends

Every year the Mason Hayes & Curran corporate team analyses the M&A deals we advised on over the previous year, to ascertain up-to-date negotiated deal trends.  Each study examines a large number of M&A deals across a wide range of industry sectors including technology, built environment, life sciences, energy, food and beverage, and consumer services.

Our most recent study demonstrates that US trends continue to play their part in the market, as US acquirers often impose their norms on Irish transactions to which they are a party.  The shifts in trends which we have noticed in the 2019 M&A Study, while buyer friendly in a few instances, broadly indicate an increasingly seller friendly market, as the availability of finance and the shortage of businesses for sale continues to lead to strong competition in auction and sale processes. An example of this was that the time limitations for the warranties were shorter than had been the case in previous studies.

This study is invaluable as an educational tool for our team and our clients alike, in making them aware of real time market norms, which greatly assists them in adopting appropriate negotiating positions in M&A transactions. 

Directive to amend EU legislation regarding cross-border conversions, mergers and divisions

On 18 November 2019, the Council of the EU announced that it has formally adopted the proposal for a directive to amend Directive 2017/1132 as regards cross-border conversions, mergers and divisions. The new rules will introduce detailed procedures for cross border conversions and divisions and it will introduce new additional rules on cross border mergers of limited liability companies established in the EU. Specific measures are intended to ensure that transactions are not artificial or abusive and that the interests of employees, members and creditors are protected.

The new directive aims to encourage digital tools to be used throughout the cross border transaction process.

The directive will enter into force 20 days after its publication in the Official Journal of the EU. Ireland will then have 36 months to adopt the measures necessary for its implementation. We will write a more detailed article about this Directive in the New Year.

Conclusion

2019 saw numerous changes introduced impacting on the corporate governance of corporate entities. Our Corporate Governance & Compliance team summarises these here

Based on current activity levels and pipeline, the outlook for Irish M&A in 2020 remains positive. Clearly the outcome of Brexit remains an unknown factor, and as we move into 2020 that continues to be a potential cloud on the horizon, but Irish M&A has remained robust despite those uncertainties through 2019. We anticipate that the M&A market will continue to be a sellers’ market with strong availability of funding, including from US, UK and continental European Private Equity and other investors looking to deploy capital in Ireland. 

For more information on issues and trends which may potentially impact the Irish M&A market in 2020, contact a member of our Corporate team. 

This article was contributed by Karen Dunleavy, Associate.  


The content of this article is provided for information purposes only and does not constitute legal or other advice.

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