Shopping with St. Patrick

Contact: Brenon Daly

Starting in the mid-1990s, Ireland joined the New Economy. The island shifted its economy from a centuries-old farming and manufacturing base into a services-oriented and technology-savvy industry. The historic economic isolation of the island gave way to brisk trade with its fellow European Union countries and beyond. Ireland prospered, with some dubbing the country ‘the Celtic tiger’ – a nod to the nickname for the fast-growing countries in Asia during that same period.

Recently, though, Ireland’s boom time has been slowed by the global recession. However, we would point out that the economic decline in the Emerald Isle has been nowhere near as sharp as in another European island nation that dramatically reinvented itself, Iceland. Of course, it helps to think of Iceland not as a country but as a hedge fund, as financial journalist Michael Lewis wrote recently.

What’s interesting to note on this St. Patrick’s Day is how Ireland’s flourishing tech sector has turned into a shopping center for other companies. Since St. Patrick’s Day last year, there has been more than twice the number of Irish tech companies sold than the number of acquisitions made by Irish tech companies. The gulf in spending by Irish companies compared to spending for Irish companies is even more pronounced. Just something to chew over today, in between bites of corned beef and cabbage.

Emerald Isle M&A

Period Acquisitions by Irish companies, $ total Acquisitions of Irish companies, $ total
March 17, 2008-March 17, 2009 11, $225m 25, $720m

Source: The 451 M&A KnowledgeBase

Emerald Isle M&A

Given that today is Bloomsday, we’ve given ourselves literary license to take a look at deal flow between the US and Ireland. (Don’t worry, if you’re like us and have never actually managed to get through James Joyce’s ‘Ulysses’ – despite taking more than a few cracks at the tome – this Insight will still make sense. Quick show of hands: Who’s actually read all the way to “…and yes I said yes I will Yes”?)

In any case, deal-flow between the two countries has been remarkably stable during the past four years, clipping along at about 30 deals each year. M&A spending in the most-recent year, however, has fallen to its lowest level, just half the previous year and one-quarter the level in the year before that. (Note: In three weeks, we’ll publish our annual Trans-Atlantic Tech M&A Banking Review. Obviously, the steady decline of the US dollar has had a big influence in deal-making. So far, we’ve seen European acquirers be even more active than the previous year, while US buyers have only spent about half as much as the same period last year. You can request a copy of last year’s report here.)

One company that may very well figure into the US-Ireland M&A tally very shortly is Iona Technologies. We noted in February that the Dublin-based company had attracted an unsolicited bid from an unknown company, which turned out to be Germany’s Software AG. Iona has retained Lehman Brothers, which led its IPO in the late-1990s, to advise it. At the time, we tapped SAP and Sun Microsystems as the most-logical buyers of Iona. More recently, an Irish newspaper reported that Progress Software or Red Hat is Iona’s ‘preferred’ buyer. Meantime, Software AG now says it’s out of the running. So it looks like we could very well be seeing an American company pick up another piece of the Old Sod. 

Irish-US M&A (year ending each Bloomsday)

Period Deal volume Deal value
June 16 2004-05 28 $1.2bn
June 16 2005-06 29 $3.8bn
June 16 2006-07 36 $1bn
June 16 2007-08 33 $860m

Source: The 451 M&A KnowledgeBase