Recent Trends in Corporate Finance in Ireland Peter Crowley Chief Executive, IBI Corporate Finance

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Recent Trends in Corporate Finance in Ireland
Peter CrowleyChief Executive, IBI Corporate
Finance

• 30 March 2006

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Contents

• Introduction
• Recent Activity in the Irish Market
• Trends in the Irish Capital Markets
• Looking to the Future
• Summary
• About IBI

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Section I

• Introduction

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Introduction

• Just completed my 6th year as CEO of IBI a
  period characterised by unprecedented levels of
  market activity and record fee levels
• In addition to the historic strength in our plc
  franchise, a growing driver of activity has been
  the emergence of a healthy mid-market in private
  company activity. Ted Webb leads our activities
  in that area.
• Activity driven by all the factors evident in the
  UK market together with specific local factors in
  particular the confidence generated by 14/15
  years of uninterrupted economic growth

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Key Drivers
Irish Economy
M A Activity

• Supportive market conditions
• Low interest rates
• Debt market liquidity and aggressive local
  banking competition
• Availability of private equity
• High net-worth investors
• Ability to form syndicates
• Strong competition for quality assets
• Strong management teams
• Succession and estate planning
• Market consolidation
• Diversification

• Low corporation tax rates
• Low CGT
• Strength of property market
• Period of uninterrupted economic growth
• Educated labour force
• International trade/open economy
• Strong consumer demand (boosted by SSIA spend)
• Boost from immigrant population

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Section II

• Recent Activity in the Irish Market

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Recent Activity in the Irish Market
Esat Telecom Elan AerFi Group CRH Hibernian
Group Hamburg Airport Ocean Communications Chase
de Vere
Eircell Eircom Esat Digfone INM
Greencore TSB ICC Golden Vale
Jefferson Smurfit Green Property Elan Musgraves F
irst Rate Travel BWG Foods BIAM Golden Pages
Allfirst Elan CRH Riverdeep Arnotts Dunloe
Ewart Jefferson Smurfit Grafton Group
The Savoy Group First Active Clondalkin Group
CRH Tullow Oil Kerry Group Jarvis Hotels
Waterford Wedgewood
Smurfit/Kappa Danske Bank Jurys Hotels
Superquinn Meteor CRH The Savoy Group Kingspan
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Deal Volumes/Type

• Upward trend in volume of deal flow from 2000 to
  2004 (140 increase overall)
• Value of deals continued to rise in 2005 despite
  lower volume
• Growing frequency of smaller but still
  substantial deals now being undertaken (69 of
  2005 disclosed deals valued at less than 50m)
• Private equity/MBO deals now form a much more
  significant portion of the Irish deal landscape
  23 of deals in 2005 compared to 8 in 2000

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Corporate Finance Activity by Sector

• The Industrial and Retail sector accounted for
  the highest proportion of deals in 2005 (19),
  replacing Food and Food Services (down from 20
  in 2004 to 10)
• IT and Telecoms sector showing a strong recovery
  (now up to 14 of deals) after the dot.com crash
  in the early 2000s
• The Financial Services sector is a continuing
  driver of deal activity (14 of deals) followed
  by Support Services Logistics and Leisure
  Travel (both at 9)

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Deal Types Cross-Border V Domestic

• Due to the open nature of the Irish economy,
  cross-border deals form the vast majority of
  transactions in Ireland (74 of deals in 2005).
  Growth in in-bound activity from 2003 on,
  indicates strategic buyers comfortable with
  economic outlook
• However, the volume and proportion of domestic
  and outward bound deals is on the increase with
  30 such transactions in 2005 (or 26), compared
  to only five in 2000 (8 of total deal activity)
• This reflects the increasing scale of Irish
  companies and the enhanced financial resources
  available to them

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Section III

• Trends in Capital Markets

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Overseas Strategic Acquirers Active in Irish
Market

• Strategic overseas buyers back in the landscape,
  attracted by the impressive Irish growth rates
  examples include the following

• Certain media driven concerns about overheating
  of the Irish economy have been allayed for Irish
  investors

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Irish Companies Active Overseas

• Irish companies are increasingly active in
  overseas markets prominent examples include the
  following

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Emergence of HNW Investors as Nimble Aggressive
Buyers

• Irish HNWs have become key players in overseas
  property transactions and now are also beginning
  to diversify into non-property related
  transactions

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International Private Equity regards Ireland as a
2nd Home Market

• The following is a selection of private equity
  firms who have invested in Ireland

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Steady stream of Public to Private Transactions

• There has been a relatively high number of take
  private transactions in Ireland in recent years,
  notable examples of which include

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Trends in Capital Markets

• Greater Concentration of Top 10 Companies within
  ISEQ

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Trends in Capital Markets

• Re-emergence of Concentration on Financial Stocks

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Trends in Capital Markets

Key Leavers ESAT Telecom Golden Vale ICC
Bank Jones Group Clondalkin Group

• Growth in Net Leavers from the ISE

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Trends in Capital Markets

• A number of key trends are noticeable in the ISEQ
  Index in recent years despite growth in the
  overall index
• Decrease in the number of listed companies
• A general increase in concentration with the top
  10 companies now accounting for c. 80 of the
  overall market cap of the index
• Steady stream of take privates has disimproved
  spread of exposure for investors to the Irish
  economic story. Financials now account for c.
  45 of total index
• AIM/IEX emerging as a meaningful source of
  activity and funding
• Now 33 Irish companies on AIM

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Section IV

• Looking to the Future

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Likely Active Sectors

• Healthcare driven by infrastructure deficit
• Waste / Environmental consolidation and new
  technologies
• Media / New Internet impacted by global
  consolidation
• Financial Services new entrants and
  disintermediation
• Business Services outsourcing
• Retail consolidation of local operators

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HNWs to emerge as aggressive non-property
investors

• Need to diversify from property exposure
• Desire for return (and increased interest rates)
  will focus investors on benefits of equity risk
  premium in broader corporate deals
• Increased sophistication of key players
• Wall of liquidity No repeat of previous
  boom/bust cycle
• High confidence levels and ability to move
  quickly will give them an edge

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Crossroads for the ISE?

• Ongoing trend of public to privates
• Apart from Aer Lingus, few new entrants -
  possibly Airtricity, Smurfit Kappa in time
• Flow of small companies onto IEX/AIM offers some
  hope
• Further concentration of index in the financials
  not healthy
• Position in global exchange consolidation as yet
  unclear

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Future Trends / Rules

• Irish economic backdrop to remain positive -
  favour soft landing view with low level of
  accompanying indigestion
• Levels of M A / market activity to remain high
  further departures from ISE likely driven by
  private equity
• Biggest potential risk (although limited) is a
  series of highly levaraged defaults followed by
  a debt liquidity squeeze
• Modest levels of interest rate increases not
  likely to dampen activity unduly
• A drift towards labour market inflexibility
  through embracing European-Style labour laws
  would cause problems for inward investment
• Global liquidity generally and particularly high
  levels of local market liquidity will continue to
  drive strong demand/competition for assets

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Section V

• Summary

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Summary

• Irish Stock Exchange at an all-time high
• Value of deal activity in the market likely to
  continue at historically high levels
• Ireland is still the fastest-growing economy in
  the EU, although infrastructure deficiencies and
  emerging risk of lack of competitiveness remain a
  concern
• Concerns that the Irish economy was overheating
  have disappeared for international strategic
  acquirers
• Certain sectors remain particularly buoyant, e.g.
  healthcare, Media/IT, financial services,
  outsourcing, waste/alternate technologies
• Increasing number of overseas financial
  investors/private equity players looking at
  Ireland for investment opportunities
• Irish high net-worth investors looking abroad for
  property underpinned opportunities in addition to
  seeking to diversify away from property
  investments into trading businesses
• Global liquidity equally evident as a market
  driver in Ireland assisted by particularly high
  levels of local investor liquidity buoyed by
  business confidence

The Future Remains Bright
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Section VI

• About IBI

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Introduction to IBI

• IBI is Irelands longest-standing corporate
  finance house with 40 years experience in the
  Irish market
• IBI is an independent, wholly-owned subsidiary of
  Bank of Ireland Market Cap c.15 billion
• IBI has consistently been ranked the leading
  corporate finance adviser in Ireland and has
  advised more companies than any other Irish
  adviser
• Only specialist CF adviser operating on a 32
  country basis, North and South
• We have significantly expanded our private
  company/client activities in recent years seek
  to bring our public company ethos to a broader
  range of clients
• IBIs team of 23 experienced professionals has an
  unparalleled long-term track record in advising
  on a wide range of complex public and private
  transactions

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Introduction to IBI
IBI is the leading Irish Corporate Finance house
having consistently advised on more transactions
in the Irish market than any other player
No. 1 Adviser in Irish transactions
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IBI Credentials Transaction Experience
Private Equity

• Unrivalled track record of sound advice in
  high-profile transactions

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Sample Public Company Deals
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Sample Private Company Deals
Adviser to Sigma Communications Group Ltd on its
29.5m disposal of Sigma Wireless Technologies
Ltd to US-based PCTEL Inc
Adviser to CR2 on its management buy-out and
private equity fundraising
Adviser to Premier Group on its 9m acquisition
of Nigel Lynn Associates Ltd
Advisers to management on the buyout of Maybin
Support Services on the acquistion by Longhill
Investment Ltd