Ken Casey and David Mangan explore the sectors currently attracting private equity investment, how private equity transactions are evolving, and the opportunities and considerations for Irish businesses and founders considering investment.

Key Insights:

Private equity investment: Key sectors attracting interest

Ireland’s long-term strength in technology (AI, fintech, medtech and devices, biotech, software and hardware), pharma and medical devices continues to attract interest and investment and we have seen this as a cornerstone of our work over the last five years in particular. Increasingly in addition, Ireland’s domestic economy attracts opportunities for investment by consolidators funded by private equity in professional services (for example, accounting, medical, engineering, veterinary, dental and tax); infrastructure; hospitality and entertainment.

Private equity deals: Evolving investment structures

Our clients (private equity, family offices, other sophisticated investors as well as entrepreneurs and founders) are more open to exploring innovative capital structures to incentivise business performance and realisation values. Private equity investors have different expectations driven by a range of underlying circumstances – the timing and performance of the underlying investment fund, the sector, the particular investment business and its fit for other portfolio company/business consolidation, the investor’s realisation strategy and the general market. We work with each client to deliver a deal which reflects their particular capital and other strategic requirements.

Private equity and governance: Balancing control and flexibility

Private equity investors take different approaches but most will seek to introduce significant protections for their investment through consent requirements in relation to significant changes to and decisions in the business, its governance and capital and debt structure. It is important to retain a balance between those reasonable expectations and retaining the day to day flexibility and success which attracted the private equity investor. Usually, with a sensible strategic approach and experienced advisers, it is possible to balance those expectations to get the right solution for the benefit of the business and all stakeholders.

Many of the control rights that a PE investor will look for are focused on the pitfalls that they have seen in similar businesses.  They will want to influence budgets and business plans on a multi-year basis and ensure that they preserve their equity stake.

In many cases, giving one or more board seats to a PE investor will mean bringing an experienced adviser to the board table, who will know how to put a coherent set of structures in place that will grow the business.

We’ve been on both sides of the table in negotiating equity transactions with providers of private capital, and we’ve seen a range of outcomes – there are some PEs who don’t look for majority control, while there are others who have a model based on full buyouts of independent businesses, so that these can be consolidated and managed together.  In many cases, the management team will be given an opportunity to roll over their equity into the new group structure, which will enable them to realise financial benefits if the new group meets ambitious growth targets.

Private equity investment: Growth, expertise and market opportunities

Private equity has transformed the corporate landscape in Ireland.  It has provided liquidity and attractive exits to owners of businesses that would never have been tradable in the past.

Aside from providing the financial power to realise opportunities for further growth, a PE investment can bring broader market perspectives.  A PE shareholder isn’t in the role of a traditional bank manager, it’s a business partner that can provide advice based on experience on how to build a successful business and reach new markets.  For Ireland’s many tech businesses, a PE investment has been a stepping stone to growth on the international stage.  Of course, the opportunity comes at a price for businesses seeking capital but the benefits of an investor’s broader market perspective and reach will often enable a business to make a step change in value which can deliver significant value for the former business owners and managers if they co-invest with the private equity investor.

Ireland’s private equity landscape: A growing international market

Ireland has delivered a very successful economic environment for private equity investors over the last thirty years. Initial investment was led by US, UK and Canadian private equity and other investment funds and their success has led to a broader range of investors now – from Scandinavia, France, Spain, Germany and also more recently from the Middle East and Asia. That is a testimony to the strength of Irish business and recognition of its resilient international potential – one which is very heartening to see as we stretch to new sectors and frontiers with particular interest in AI opportunities.

Our Corporate team were pleased to contribute this insight to The Irish Times Corporate Finance report. Read the full Irish Times Corporate Finance report here Trading cash for control – The Irish Times

Read more about our completed transactions and how we can help on our Recent Transactions page – Corporate Deals – Hayes solicitors LLP