Ireland now a hotspot for M&A - particularly in the food and beverage sector – but what’s driving this growth activity?

A view from Bibby Financial Services………

While there have been a range of pressures on businesses in Ireland recently, such as a plethora of increasing costs and inflation, growth has definitely been the biggest trend of the year so far. We are finding that many customers are engaging in expansion via M&A and MBI / MBO activity, as well as a range of other growth scenarios such as moving premises or investing in infrastructure, equipment, machinery and Research and Development. This is a significant change from last year, when most of the demand for funding related to working capital and cashflow for the day-to-day running of businesses.

The other significant change worth noting is that businesses are now using a mix of funding solutions to finance their growth ambitions. Instead of taking out a loan to finance a transaction, which involves hefty repayments over a period of time, business owners can now look to fund growth through a variety of financial solutions.

As a result, many are now opting to use a hybrid mix of funding to fuel their M&A or growth activity. This mix includes Invoice Finance. Why? Because invoice finance offers businesses access to money outstanding from their unpaid invoices, helping them to obtain income they have already earned but not yet received. This means businesses can use their own funds to finance bigger growth plans without having to borrow money.

So, for example, if you have €300,000 or €3,000,000 currently owed to you by your clients, Invoice Finance can allow access up to 90% of the invoice’s value within 24 hours. The remaining balance will then be paid to you, minus an agreed fee, when the customer has paid their bill. So, unlike a loan or overdraft, Invoice Finance does not involve ongoing monthly repayments. This revolving credit option means that once your invoices are paid, you can continue the cycle – upload your invoices, draw down, use the funds and simply repeat. The benefit is that you can access multiples of the funding required, compared to a fixed line of credit.

Bibby Financial Services is currently, on average, facilitating over €1m a week in new funding limits, and this is in addition to the millions in weekly payments to existing clients. This is supporting businesses with a turnover ranging from €750,000+ across a variety of sectors including Manufacturing, Wholesale, Recruitment, Construction, Transport and Haulage, Food and Beverage, as well as business services.

In our view, the increased M&A activity in the Irish market is being driven by a combination of economic stability, strategic access to the EU, industry consolidation, technological advancements, availability of capital, and the desire for strategic positioning and diversification.

According to research from Davy, Irish M&A volumes defied expectations in 2023 – there were a total of 405 M&A deals, a 9% decrease on 2022, which is a resilient performance when measured against a 23% decline in global M&A volumes. Measuring against the pre-COVID period (2018-2019), 2023 transaction volumes were 38% above the pre COVID average of 294 M&A deals in Ireland. With M&A deals in Ireland increased by 14% in the first quarter of 2024, ‘growth mode’ is projected to continue for the remainder of the year.

These factors are collectively making Ireland a hotspot for mergers and acquisitions, particularly in the food and beverage sector.

We are finding that Irish companies in F&B are keen to acquire businesses that offer innovative products, technologies, or processes that can enhance their competitive edge. Advancements in food technology, sustainability practices and catering for changing consumer demands are also critical factors here.

As an example, our client Imbibe Drinks, trading as Newport Brands, recently acquired C&C’s soft drinks portfolio as part of an MBO. The business is now aiming to double the portfolio’s current turnover of c. €14m in five years through a dual-pronged approach of investing in the existing brands and winning new distribution agreements. The hybrid funding mix utilised to secure the deal involved a working capital arrangement for Newport with Bibby Financial Services to finance growth plans.

And in addition to Irish companies embarking on the M&A trail, it’s also worth noting that as Ireland remains the only English-speaking country in the EU, it is now a very attractive hub for multinational corporations looking to maintain or expand their presence in Europe. This access is particularly appealing for companies in the food and beverage sector looking to streamline their supply chains and distribution networks. We therefore expect to see more activity in this space.

What’s clear is that this recent shift to alternative funding options to fuel M&A and overall growth aspirations indicates that there’s an increasing requirement for more collaboration across traditional banks and independent financial providers to ensure we are learning from each other and, more importantly, are able to offer businesses a wider spectrum of funding options.

To facilitate this, we have a partnership with PTSB to offer businesses access to the entire spectrum of funding options, allowing them to address any short- and long-term funding requirements. This relationship between one of Ireland’s leading retail and SME banks and a specialist lender is one of the first of its kind in Ireland and is currently transforming the Irish financial services landscape.

Irish businesses have consistently shown that they are capable of adapting to change and overcoming challenge. As a result, now is the time to plan, find the right partners to achieve long-term ambitions – whether that’s exiting, or establishing strong foundations to continue growing and thriving in a transformed economic landscape.