Next time you find yourself in conversation with a social scientist, ask him or her about the importance of unintended consequences. Sociologists and economists will often tell you that studying knock-on effects is (or maybe should be) the heart and soul of their fields.
Although rarely mentioned, this is often the case in finance and business too. In June 2016, when supporters of Brexit secured a narrow victory in a referendum in the UK, who expected that within seven years Irish companies would be choosing to internationalise in North America instead of looking for deals next door?
“Irish companies are seeking deals in North America and continental Europe,” said David Jones, Corporate M&A Partner at Matheson. “As a consequence of Brexit, more companies are diversifying to seek geographical exposure and as central banks get ahead of inflation, people are willing to transact again.”
In September, Smurfit Kappa Group [LON:SKG], a Dublin-based corrugated packaging company, announced a mega-deal with Atlanta, Georgia-based packaging group WestRock [NYSE:WRK], to create Smurfit WestRock. The merged entity will be the largest listed global packaging partner by revenues, as reported. Matheson worked on the deal, which is pending regulatory approval and is slated to close in 2Q24.
The deal is the second largest on record involving an Irish buyer, according to Mergermarket data. It is also part of a wider trend following a bleak 2022. Irish suitors, primarily strategics rather than sponsors, have snapped up companies’ worth EUR 23bn overseas in the year to date (YTD), up 538% from a meagre EUR 3.6bn in all of 2022. Deal counts were comparable over both periods.
The US has been by far the main destination for Irish investment, with deals worth EUR 19.8bn in YTD23, compared to EUR 1.4bn for the second destination of Italy.
American equities beckon
Meanwhile, Irish domestic deals are at a 14-month low, with a total volume of EUR 690m, down 80% from YTD22. Metal and steel and financial deals occupied top spots, overtaking last year’s real estate and technology. Not a single deal north of EUR 200m was announced this year, compared to four in YTD22, and seven in YTD21.
However, the clever play remains domiciling in Ireland to benefit from the country's investor-friendly regulatory and tax structure, while listing in the US to gain access to liquid capita. “Over the last ten to 15 years, through a combination of merger transactions, re-domiciliations, de-SPAC transactions and IPOs, there have been approximately 40 Irish incorporated companies listed on NYSE and Nasdaq,” Jones said.
Next steps
The move towards headquarters in Dublin and a listing in New York is likely to continue in the future, Jones said, adding that acquisitions of US-listed companies can help achieve this goal.
A search of Mergermarket's intelligence shows Glen Dimplex, a heating and ventilation, precision cooling, flame, and consumer appliances company, wants to emulate Smurfit Kappa. It plans to scale globally. Meanwhile, other acquisitive companies in Ireland include Flutter Entertainment [LON:FLTR] and Grafton Group [LON:GFTU].
Disposals can also work for companies interested in turning to the US, as building materials group CRH [NYSE:CRH] has shown. It sold its European arm in 2019 and then followed through by making its US listing the primary one in September 2023.
It might not have seemed that way at the time, but by making the UK more inaccessible to Irish business executives from 2016 onwards, the architects of Brexit might have been doing them a favour.
by Anjali Piramal with analytics by Santosh Shetty.
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