Now that the dust is beginning to settle after two years of significant economic disruption from the Covid-19 pandemic, Irish SMEs are now in a position to plan for growth with more certainty. Business owners now feel more confident about pursuing a range of growth plans, including Mergers and Acquisitions activity. New figures show that Ireland experienced record M&A transactions over the past 12 months, and this trend looks set to continue.
According to Experian, there were 628 M&A transactions in Ireland in 2021, an increase of almost 27% on the 495 deals recorded during 2020 – already a surprise record figure given the ongoing Covid-19 restrictions. The total value of Irish M&A transactions hit a significant €96bn, nearly twice the figure of €31bn recorded in 2020.
Coming into 2022, it shouldn’t come as a surprise that M&A is firmly on the agenda for Irish businesses. Covid offered many entrepreneurs an opportunity to reflect on a turbulent time, with many deciding it’s time to exit their business while others concluded that now is the time to refocus, innovate and grow.
Recent research by Bibby Financial Service shows that 35% of Irish SMEs are actively considering M&A, MBO or MBI activity in 2022, with Munster (41%) and Leinster (37%) leading the trend. We are also noticing a new trend as to how these transactions are funded.
The impending exit of Ulster Bank and KBC from Ireland, coupled with the fact that Irish business owners now want to engage closely with their financial partners, Irish SMEs are looking for a hybrid mix of funding to fuel their M&A activity. Once restricted by a lack of options for funding growth, business owners can now look to fund growth through a variety of financial solutions.
Our research shows that just over one fifth (21%) of Irish SMEs plan to use invoice finance to funds M&A transactions over the next few months, with 35% in Munster and 17% in Leinster looking to use the finance solution to fund this activity. Just under a third of Irish SMEs are looking to fund these transactions with business loans.
This shows that there’s an increasing requirement for more collaboration across traditional banks, independent financial providers and fintechs to ensure we are learning from each other and, more importantly, are able to offer businesses a wider spectrum of funding options. Having greater awareness of and access to the entire spectrum of funding options would enable SMEs to address any short- and long-term challenges.
What holds many business owners back is that they don’t want to have to take out a loan to finance a restructuring transaction. As a result, many are now opting to use Invoice Finance as a way of partly financing these deals or even on a standalone basis, as it offers businesses access to money outstanding from their unpaid invoices, helping them to obtain income they have already earned but not yet received.
So, if, for example, you have €300,000 currently owed to you by your clients, Invoice Finance will give you 90% of the invoice’s value within 24 hours. The remaining balance will then be paid to you minus an agreed fee when the customer has paid their bill. This means that, unlike a loan or overdraft, Invoice Finance does not involve ongoing monthly repayments.
As a result, Invoice Finance is an ideal fit to release the required cash and help fund M&A activity. A confidential Invoice Finance facility can be used towards the initial contribution and continue to provide essential working capital to allow businesses trade-on successfully without any cash flow concerns.
So, if you’re actively considering your options for your business, Invoice Finance can help. In addition, we're working together with permanent tsb, to offer Irish businesses tailored funding solutions for more complex business deals. Get in touch with our funding specialists today to discuss your business or clients needs.