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Deal making in the Republic of Ireland is at record levels with billion euro deals firmly on the agenda. This is underpinned by strong M&A activity at the small to medium-sized end of the market and robust economic growth.

For Irish deal makers, Q4 of 2006 was unprecedented. The value of mergers and acquisitions involving Irish companies was euro8.6 billion (£5.86 billion) – a record for the country.

But the figures were distorted somewhat by megadeals such as educational publisher Riverdeep’s euro3.98 billion acquisition of US-based rival Houghton Mifflin and entrepreneur Dermot Desmond’s sale of London City Airport to AIG & Global Infrastructure Partners for euro1.1 billion.

Nonetheless, there were 77 deals in the quarter, the majority at the small to medium level, according to corporate finance boutique Ion Equity’s quarterly M&A tracker survey. These deals represented a 35% increase year on year. In addition, the deals were spread across a range of sectors, with building, property and construction leading the way with 46% of the deals by volume in the quarter.

Across 2006, some euro15 billion worth of deals were completed involving Irish companies, a 22% increase on the previous year, demonstrating the strength of corporate transactions over the year.

Ion Equity director Joe Devine reported that Irish deal making has been buoyed by ready access to funds, including inexpensive debt and private equity and continuing low inflation rates.

Early reports for the first quarter of 2007 suggest this deal making trend continued in the Republic with property again to the fore, according to Irish news Website www.rte.ie. Deals such as Quinlan Private, which headed a consortium of investors to acquire 47 hotels from Marriott for euro1.6 billion (£1.1 billion), were among Q1’s highlights.

With deal making at record levels, it is no surprise that the Republic is also faring well economically. The economy is growing strongly and in comparison to the UK, only London, the Southeast and Southwest of England and Northern Irish economies performed better in terms of output/business activity in the three months to the end of February, according to the Ulster Bank PMI Report for Northern Ireland.

But this period of growth may be coming to an end; many SME owner-managers are reported to be more sceptical about the future prospects for their businesses. A recent survey of 500 SMEs by small business group ISME revealed that only 27% of businesses were optimistic about prospects for the next 12 months, down from 38% from the previous survey in winter 2006.

Meanwhile, 26% of businesses were openly pessimistic about the future – compared to only 14% in the previous survey. Labour costs were the biggest concern for 19%, with economic uncertainty close behind on 18% – more than doubling from the last survey.

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