Political stalemate expected to impact on north's mergers and acquisitions market
THE ongoing political stalemate at Stormont is expected to stifle activity in the north's mergers and acquisition (M&A) market this year, according to a new survey.
KPMG's M&A Outlook for 2018 predicts subdued economic growth in the year ahead, with just 27 per cent of the executives and advisors involved in the M&A market expecting activity to increase. This is in contrast to the more optimistic pictured painted across the border in the Republic, where 57 per cent of respondents expect an increase in deal volume.
According to the survey the more subdued outlook in the north is, in part due to the Stormont impasse.
“Northern Ireland respondents were asked whether the ongoing political uncertainty in Northern Ireland will have a negative impact on deal activity. It is no surprise that the overwhelming majority of respondents believe it will," partner in corporate finance at KPMG in Ireland, Russell Smyth said.
The survey also questioned M&A professionals on the impact of Brexit on the sector, but Mr Smyth admits the outcome is not clear.
“While Brexit features on the radar of deal makers, there is no consistent view in either jurisdiction on its likely impact on deal activity, suggesting too much uncertainty remains to predict its impact on business or business decisions.”
The sectors which respondents expect to be most active in 2018 in both jurisdictions will be agribusiness and food, technology and healthcare.
In the Republic, 55 per cent of respondents expect debt to be the primary funding source compared to just 42 per cent in Northern Ireland where cash reserves are expected to be more prevalent, possibly representing a more cautious approach to funding.
Despite a more cautious approach and well-publicised headwinds, there are a number of positives which will boost the M&A market in the coming year according to the survey
“Strong capital availability in the market, including increased private equity and alternative lender activity, and more developed M&A strategies among both Northern Ireland and Republic of Ireland corporates will ensure a healthy pipeline of deals are completed in 2018," Mr Smyth added.