Fund managers turn to steady and reliable Ireland

Ireland has traditionally held its own in terms of venture capital activity. Setting aside the VC goliaths of Germany, France and the UK, Ireland has accounted for 5.3% of European early-stage and expansion deals since Unquote Data records began. By way of comparison, according to statistics from the European Commission and setting aside those three countries, it accounted for around 3.8% of the EU's GDP in 2016. However, when it comes to buyouts it has accounted for just 1.9% of European volume. Yet buyouts have been steadily rising in recent years, with the 12 deals in each of 2017 and 2018 being 50% more than in any other preceding year, according to Unquote Data.

"Large corporates are moving a significant number of staff to Dublin to head up their European operations; especially tech companies such as Salesforce, Google, LinkedIn, Amazon and now Facebook," says Elaghmore founding partner Andy Ducker. "Ireland is economically robust and stable, has a strong talent pool, is English-speaking and is easily accessible from the US. The landscape in terms of property prices and the banking sector is far more stable than it was around a decade ago. The same cannot be said about the UK because of Brexit. A number of banks are now taking up office space in Ireland as a result and that presents opportunities for private equity."

Founded towards the end of 2016, Elaghmore made its first Irish investment two years later with the acquisition of Dublin-based Alucraft Group – a designer, manufacturer and installer of architectural glazing systems, and Ducker says the firm is seeing a growing pipeline of opportunities. He explains that there are a number of owners who have built businesses over the course of the past 20-30 years and are now looking to realise capital. Ducker also says there is an increasing scope for – and ambition among – Irish companies to expand internationally, which lends itself to Elaghmore's approach, as well as the private equity model more broadly.

"The Irish market is far less saturated with fund managers than the UK mid-market," says Ducker. "There are very few UK-based firms that have a physical presence in Ireland. We have done our utmost to ensure we are well-connected and well-known across the intermediary market. There is an opportunity for managers, such as ourselves, that are deploying tickets at around the £10m mark. But the Dublin corporate finance community is a small one, where everybody knows everybody. You have to invest the time and effort in building those relationships in order to be successful."

Betting bigger on venture
On the venture front, activity has stabilised at around 20-25 deals per year in the past three years and the country saw nine early-stage or expansion rounds in H1 2019, according to Unquote Data. However, the size of these investment rounds appears to be heading upwards. The €606m invested in such deals in the first half of this year marked the second-highest aggregate value for a post-crisis half-year period. Notably, the €829m invested in 2016 was largely driven by a €350m investment in Ion Investment Group and a €230m round for EIR.

Scottish Equity Partners (SEP) made a significant investment in the Irish market in June, investing €25m for a minority stake in payroll software developer Immedis. Managing partner Calum Paterson says that the country has been a focus for SEP for some time, as evidenced by the fact that its current growth equity fund was backed by the Ireland Strategic Investment Fund (ISIF). He says ISIF and Enterprise Ireland have played prominent roles in supporting startups and early-stage businesses.

"Talent, technology and tenacity are in abundance in Ireland, and that is helping to build momentum," says Paterson. "Almost all funding rounds of less than €10m over the past 12 months have been supported by local investors. However, as companies scale, they increasingly require a funder with different resources, experience and skill sets. One with solid experience of managing global growth, of forming international syndicates, of building boards and with the ability to provide both growth capital and liquidity opportunities. That's where we see the opportunity."

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• Topics
• UK / Ireland
• Investments
• GPs
• Ireland
• Scottish Equity Partners