Buying a business in Ireland
The Irish economy has been an attractive investment location for some years now. Moreover, the country’s handling of the Covid-19 pandemic has been better than most jurisdictions – just two good reasons why overseas investors are looking to buy in Ireland.
The pandemic hit economies hard around the world in 2020, particularly as a result of the global lockdown, when many businesses temporarily shut up shop. But since restrictions started to loosena number of economies have bounced back strongly – and none more so than Ireland.
Figures from the Central Statistics Office (www.cso.ie)reported that the Irish economy grew by 11.1% in the third quarter of 2020, following contractions of 3.5% and 3.2% in the first two quarters respectively, with the resurgence noted across all sectors. The growth was largely driven by personal spending and exports of goods and services. This made it the fastest-growing economy in the world, according to Goodbody Stockbrokers.
But while this growth was expected to be short-lived as Ireland reintroduced lockdown measures in the final three months of the year, it nonetheless demonstrates the underlying strength of the Irish economy –and why there are plenty of appealing opportunities to buy existing businesses.
Indeed, Irish M&A activity held up relatively well in the first half of 2020, despite the effects of Covid-19 from March. During the first half of the year 65 deals were signed off compared to 75 in the first six months of 2019. The value of those deals fell from €2.5 billion to €2billion. Of those deals, 89% were in the mid-market, valued between €5million and €250million, according to figures from William Fry’s Mid-year M&A Review 2020[www.williamfry.com/docs/default-source/reports/william-fry-mid-year-ma-review-2020.pdf?sfvrsn=0].
Of the deals announced from January-June 2020, 82% involved buyers from outside Ireland investing €1.9 billion. The number of deals declared was only 10% down on the same period in 2019, compared to domestic deals, which more than halved in the same period.
The most active deal sectors were telecoms, media and technology. These accounted for more than a third of deals signed off. Meanwhile, pharmaceuticals, medical and biotech provided about a third of the total deal value in the first half of the year.
All these statistics illustrate that businesses in Ireland remain attractive to overseas investors, and that plenty of opportunities are out there in a range of sectors.
Why buy a business in Ireland?
The Irish economy is mature and has performed strongly this year when conditions have allowed.It has also been a hotbed of investment from inside and outside the country for many years in a variety of sectors.
Other factors to consider are the favourable tax regime in Ireland – for instance, corporate tax runs at 12.5%.
Additionally, Ireland has a young, highly qualified and flexible workforce – ideal for growing a newly acquired business. Ireland also has reasonable commercial property and rent prices, and a competitive standard of living – even in Dublin, Ireland’s capital, the price of goods and services do not increase much compared to the rest of the country.
Of course, one of the stronger pulls for investors currently, especially those in the UK, is that Ireland is part of the European Union, and therefore has access to the single market and the 26 other member countries in it. At the time of writing – less than two weeks before the end of 2020 – it is still uncertain what type of trading relationship the UK will have with the EU once the transition period ends on December 31. Negotiations are ongoing on whether there will be some sort of trade deal, or whether the UK reverts to trading on World Trade Organisation terms. Whatever happens, there will not be frictionless trade between the UK and EU, which makes Irish businesses look increasingly attractive.
Other advantages of being in the EU include:
- Ireland is the only country in the EU that has English as a first language
- Potential access to EU research and development grants
- Access to other nations around the world that the EU has trade deals with
- Ireland is part of the euro that is a stable currency and unlikely to suffer significant fluctuations in its value, which can affect exports and business confidence.
Moving to Ireland
When investors – be they entrepreneurs or owners of existing businesses – look to move into a new country, setting up a new operation is often costly, time consuming and bureaucratic, especially if they try to break into a mature sector.
Another, often easier, option is to buy an existing business. Some of the advantages of this are:
- The business has a demonstrable trading history, including profits/losses
- It already has customers and a reputation in the locality/nation (depending on the size of the business)
- It has employees who know the business and how it runs, as well as the market and customers within it
- The business already has any appropriate licences and certificates needed to trade, which saves time and cost over setting up a new operation
- Limited research needed on things like the tax and legal systems
- Limited risk compared to setting up a business from scratch.
If investors/business owners see this as a more viable investment route, they should hire an accountancy firm that can perform a deep dive into the target business’ accounts. This will help buyers to understand the financial state of the company and ensure they are paying an appropriate price as the acquiring party.
Local accountants will also understand the domestic market and can advise on the competition the business has from other companies in the sector, and its prospects for growth going forwards.
Investors/businesses looking to acquire also need to look at why the business is for sale. Is the current owner looking to retire, cash in on their hard work or fund another business venture? Or is it struggling financially?
Finding a business to buy
For investors there are several ways to find an Irish business to buy. For instance, look at websites such as www.savvy.ie that have lists of businesses for sale, although these tend to be at the smaller end.
Investors looking for larger or more established businesses can engage a broker. This individual or company will provide information on any businesses coming onto the market for sale, including those not publicised.
Factors to consider when buying a business
There are also a variety of things that those looking to acquire an existing business in Ireland need to consider:
- Research: Before making any approach to acquire a business in Ireland, any potential acquirer needs to do thorough research on the target, the sector it is in and the strength of rival companies in the sector
- Tax: Any deal should be structured in a tax-friendly way to ensure that there are no nasty surprises later
- Visit the business: It might sound obvious but taking in the business and looking at it first-hand and seeing how it works on a day-to-day can be invaluable
- Survey the premises: If you are buying premises as part of a deal, it is worth arranging for an independent survey and valuation to ensure that there are no hidden problems and that its price is fair
- Arranging finance: Once a valuation of the target has been made, then arranging the finance to buy it has to be considered. Can it be funded through existing resources? Will external funding be needed and, if so, what? Would it be bank financing, equity financing or another source?
If you are considering buying a business in Ireland from the UK it is vital to ensure you get the right support from local experts. While Ireland is close to the UK in many ways, in business it does have some significant divergences in the law and the way things are done. Having locally based advice means these potential pitfalls do not turn into time-consuming or financially costly issues. This can be the difference between the acquisition delivering the value hoped for and not.