All eyes on business-friendly Ireland as PE market grows

According to unquote" data, Irish deal volume in just the first two months of this year is already nearing the total number of deals done in 2008. So far, seven deals have been recorded for January and February, compared with just 10 for all of 2008.

Every corner of the industry has been active in recent months. Carlyle acquired Kildare-based chocolate maker Lily O'Brien's at the end of January, enabling the firm to finally put to work its Carlyle Cardinal Ireland fund, which closed last year on €125m. In January, Blackstone's credit arm GSO injected $200m of equity into Irish helicopter leasing company Lobo Leasing. And in the mid-market, Highland Capital Partners Europe led a €23.5m investment in Limerick-based recycling and waste management company AMCS Group.

Even the secondaries market has seen some activity, with the National Pensions Reserve Fund (NPRF) of Ireland offloading around €800m of global private equity fund interests to secondaries house Lexington Partners.

According to Rory Quirke, investment director and co-head of investments for MML Growth Capital Partners Ireland, this recent jump is thanks to government initiatives filtering through. "The government, through agencies such as Enterprise Ireland (EI) and NPRF, identified a lack of capital for emerging and growing companies so launched a number of initiatives."

Indeed, Quirke is investing from MML's recently closed Ireland-focused €125m vehicle, which received a €25m cornerstone investment from EI. Furthermore, as well as securing commitments from US investors, the fund was also supported by Irish bank AIB Group.

Commenting on his experience of selling Ireland to international investors, Quirke says: "2013 was a good time to sell Ireland. The market possesses strong fundamentals; politically it is stable and it is a pro-corporate environment. Ireland's small and open economy ensures that businesses naturally think internationally and its favourable tax rate is a demonstration of the government's commitment to the market."

Easy sell
Furthermore, Ireland is constructing a private equity infrastructure in order to provide funding for businesses all the way through the value chain. As well as MML's recent fund close, the Bank of Ireland and Invest Northern Ireland (Invest NI) committed £10m and £15m respectively to Kernel Capital's recently closed growth capital fund. Crescent Capital's £22.5m venture capital fund also received a £15m cornerstone investment from Invest NI. And at the higher end of the spectrum, Carlyle's aforementioned Cardinal Ireland fund was supported by NPRF.

Prior to the crisis, Ireland's private equity market was arguably non-existent, with banks and business angels providing the bulk of development capital. The financial crash in 2008 caused both of these groups to step back, leaving a funding gap.

With Europe now in recovery mode, there are plenty of young Irish businesses demanding development capital, or companies in need of a liquidity event to solve succession issues. While this provides plenty of scope for origination, the relative newness of private equity in the market means a lot of time still needs to be spent on educating companies.

On top of a supportive government, receptive banks and a wealth of opportunities, perhaps the most attractive element of Ireland's new private equity market is the US view of the country as a European hub. Any company headquartered in Ireland with healthy exports to Europe is surely an attractive proposition to prospective US trade buyers. Companies headquartered in Ireland include Amazon, Apple, Cisco, eBay, Facebook, Google, LinkedIn, Microsoft, Oracle, PayPal, SAP and Twitter to name a few. The presence of these corporate behemoths will encourage more US and potentially Asian heavyweights to be aware of the country's welcoming business landscape and is likely to drive acquisitions of well-run Irish companies.

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