Investment Banking in Ireland: The Best Way to Advise on Pharmaceutical M&A Mega Deals?
Do you believe the league tables?
In other words, if one country or industry has a lot of deal activity, does that mean there are substantial M&A deals there?
You might say, “Yes,” or, perhaps, “They’re not perfect, but the league tables are roughly correct.”
But there are always exceptions.
One big example is Ireland, where the deal lists might have you believing that the country is a hotbed for massive pharmaceutical M&A deals.
But the story on the ground is quite different since these companies are not really in Ireland – they’re headquartered there simply for tax purposes.
And actual Irish investment banks are rarely involved with these transactions.
So to get the real story on investment banking, M&A, and private equity in Ireland, I recently sat down with a reader who works in corporate finance there.
Among other topics, we delve into:
- What the finance industry is like, including the most common deal types and industries.
- The top firms, both local and global, and how Big 4 firms compare with investment banks.
- The most common paths into the industry, and why accountants get so much love.
- Similarities and differences with UK-based firms.
Breaking Into Corporate Finance in Ireland
Q: So let’s start with your story, as usual.
A: Actually, the industry is tiny here so I’d rather not say too much about myself.
Q: Sure, no worries… then what can you tell us, generally, about people who get into corporate finance and investment banking in Ireland?
A: Almost everyone here is an ACA-Chartered Accountant (even YouTube agrees).
Most people do a university degree at one of the top schools, such as University College Dublin (UCD) or Trinity College Dublin, and then do 2-3 years in the Institute of Chartered Accountants.
It is possible to get into the industry through other routes, such as aggressive networking, but in practice it is quite unusual.
That’s mostly because the industry here is very, very small, which means there are fewer opportunities to break in “off the beaten path.”
Q: So what do you mean by “very, very small?”
A: On average, the local banks here might hire 1-2 new junior team members per year.
And the Big 4 firms here might hire 1-2 trainees per year.
So at the graduate level, you’re looking at maybe 12 spots in corporate finance and investment banking in the entire country each year.
To have a good shot, you need not only a degree from one of the top schools, but also high grades and standardized test scores.
It’s so difficult that many people don’t even try, or they aim for audit roles at the Big 4 firms and then try to transition over to corporate finance later on.
Or, they leave the country and apply for positions in the UK instead.
Q: And what is the process like if you decide to roll the dice and apply?
A: At the Big 4 firms, the application process is similar to the process anywhere else: you submit an online application, your academic results, and answers to a few questions about why you want to work there.
If you get past that, the interviews themselves are also standard and somewhat competitive.
But if you perform well and you’re well-liked by the team, you will get an offer quickly.
In some cases, you may only have to do one interview (usually with a Partner or Director).
The local investment banks here have their own graduate programs and recruitment processes, which I believe are more rigorous and which will almost certainly involve multiple rounds of interviews.
But I don’t think they necessarily conduct assessment centers like you see in the UK and the rest of the EMEA region, or, if they do, they’re not as intense about it.
Wheeling and Dealing in Ireland
Q: Thanks for explaining all that.
Moving on, what exactly is investment banking like in Ireland?
A: Going back to your introduction, you should NOT be deceived by the news of all these “Irish pharmaceutical companies” that are being acquired for tens of billions of dollars/euros.
There are rarely, if ever, any Irish advisers involved, and most of the work takes place in New York or London.
Once you eliminate those deals, everything looks much smaller here.
Within investment banking, there are three main categories of firms: the global bulge-bracket banks, the local Irish banks, and the Big 4 firms.
Nearly all the bulge-bracket banks have back-office operations and hedge-fund services such as prime brokerage in Dublin, but they rarely put front-office teams on the ground.
They occasionally advise Irish companies on bigger deals; for example, Goldman Sachs worked on IAG’s bid for Aer Lingus, but I believe they did that deal out of their London office. Credit Suisse has also advised on REIT-related deals (REITs only came into existence here in 2013).
A few “elite boutiques,” such as Rothschild (much stronger in Europe), also work on deals from time to time.
Then there are the local Irish banks, including the four main ones: Davy Corporate Finance, IBI (the Investment Bank of Ireland), Investec (formerly NCB), and Goodbody Stockbrokers.
Davy is sometimes known as “the Goldman Sachs of Ireland,” and they have advised large Irish companies such as Ryanair in the past.
One bigger deal from earlier this year was Dalata’s 455 million EUR Enterprise Value acquisition of Moran Bewley’s hotel portfolio.
Davy might advise on between 10 and 20 deals per year, with an average deal size in the 50 – 500 million EUR range.
The large corporates here tend to work with Davy, IBI, JPM, or GS.
Another interesting point is that hardly anyone leaves the top local firms. Look up the LinkedIn profiles of staff at Davy and IBI, and you’ll find people who have been there for years or decades.
I don’t know why, exactly, but I believe their compensation is quite generous and the culture is fairly laid-back.
Q: Thanks for all that.
What about true regional boutiques that advise only Irish companies on much smaller deals?
A: There are a few of them as well, though some are closer to merchant banks.
Examples include Pegasus Capital, Key Capital, and Capnua.
These firms have 3-4 professionals, and they advise on deals between 5 and 50 million EUR. Occasionally they will advise on a few bigger deals (over 100 million EUR).
A typical deal might be a debt issuance for a gym chain somewhere in that value range.
Q: Great. And now what about the Big 4 firms?
A: Each advisory department has roughly 20-30 employees, but it’s hard to gauge the number who do M&A work because transaction services, forensics, and restructuring are grouped together within “corporate finance” at many firms.
Fee income in corporate finance at each Big 4 firm is roughly 4 – 7 million EUR annually, and each firm tends to advise on deals ranging from 10 million EUR up to 100 – 150 million EUR.
We consider that “middle market,” but those deals are quite small by the standards of the US or UK.
Occasionally there will be a bigger deal, but it’s rare.
Q: Thanks for that bucket of information.
You just mentioned that larger hotel deal (Dalata’s 455 million EUR acquisition) earlier – is hospitality the biggest sector there?
Or is it more diversified?
A: There are lots of tourism, leisure, and hospitality-related deals, but overall activity is relatively diversified.
Usually, one asset class will get popular, stay popular for 12-18 months, and then something else will replace it.
For example, nursing homes have been on the upswing lately due to supply and demand issues and an aging population here.
Also, loan portfolio sales were huge for a while. Irish banks were heavily exposed to the property market in the 2008 financial crisis, and the government (the National Asset Management Agency, or NAMA) had to take over most of the banks’ bad loans initially.
After a few years, though, NAMA began selling the loans and large private-equity firms such as Blackstone, Carlyle, Lone Star, Apollo, and Cerberus became buyers.
Private-equity firms, such as Sankaty (a subsidiary of Bain Capital), were also very interested in those loan portfolios (one example was Ulster Bank’s sale of distressed real-estate loans).
Q: You just mentioned private equity, so let’s throw that into the mix as well.
Any thoughts on the PE industry there?
One example is Kennedy Wilson, which entered in 2011, started buying property, and made a killing on it. Wilbur Ross also had a very successful deal for a minority stake in the Bank of Ireland.
The only traditional mega-fund with a presence on the ground is Carlyle. They’ve set up joint ventures in many countries, and they did a similar JV here with Cardinal Capital, a local firm with around 350 – 400 million EUR under management.
There are a few local private-equity firms, but they are somewhat non-traditional and quite small – a few Partners and one analyst or associate.
Examples include Ion Equity, FL Partners, and Lioncourt. Ion Equity was very active in energy and wind-farm transactions, while FL Partners has done some relatively large deals (by Irish standards) of up to ~200 million EUR.
One of their most successful deals was a majority stake acquisition in Sunseeker, a yacht company, for 30 million EUR in 2011, followed by a flip for 350 million EUR in 2013.
Finally, credit funds and real estate private equity are also big due to some of the reasons mentioned above.
One well-known credit fund is Avoca Capital, which was set up by former Irish bankers and then acquired by KKR. Asset-management firms like Franklin Templeton were also very active in Irish bonds.
Dublin vs. London
Q: Thanks for describing the industry there so well.
You’ve been a bit negative on finance in Ireland this whole time – but surely there must be some advantages of working in Dublin, right?
A: Yes. For one, the hours are better.
At a Big 4 firm here, you’d probably work 40-50 hours per week on average, with an occasional 80-90-hour week if an urgent deal-related matter comes up.
You would work more than that at an investment bank, but you’d still have a better work/life balance than in London.
That work/life balance partially explains why so many bankers stay at firms like Davy and IBI for the long term.
As you’d expect, however, compensation is also lower here.
Here’s a rough idea of base salaries at Big 4 firms, as of 2015:
- “Trainee” (a fresh hire that is not yet a CA): 22,000 – 23,000 EUR per year
- Post-Exam Pay: 45,000 – 48,000 EUR
- Manager / Assistant Manager: 55,000 – 65,000 EUR
- Director: 90,000 – 140,000 EUR
- Partner: 200,000 – 700,000 EUR
Bonuses are also relatively small, ranging from 10% to 20% of your base salary.
So as your previous Big 4 interviewees have pointed out, the real money comes when you make Partner, which very few entry-level hires do.
It’s so tough to make Partner in advisory groups at these firms that many people join the audit department and aim for Partner-track positions there instead.
It’s a bit depressing that an IB analyst in London earns more than a Director at a Big 4 firm in Dublin, but it is what it is.
Q: Any sense of what the compensation looks like at local investment banks?
A: I don’t know the exact numbers, but my guess is there is still a significant discount to pay at bulge-bracket firms in London. If the firm only advises on 10-20 deals per year, there just isn’t as much money to go around.
I’m sure you’d earn far more than you would at a Big 4 firm, but I don’t think it would be on par with pay at large banks in the leading financial centers.
A Director or SVP at a local bank would earn less than a Partner at a Big 4 firm, but a Managing Director at a bank would make at least the same, if not more.
Q: So it seems like someone who’s motivated to earn more would leave the country.
People do tend to stay at the local investment banks for a long time, but turnover at the Big 4 firms is quite high.
Some people quit corporate finance entirely, while others move into corporate development at global companies here. Two popular options are CRH, a building materials company, and DCC, a conglomerate.
They’ve both made big acquisitions, so corporate development there has some appeal.
Other large companies with corporate-development teams include Kerry Group and Glanbia, both in the food & beverage sector.
It is astoundingly difficult to get into private equity in Ireland because there are maybe 1-2 open roles per year.
Some local firms have a reputation for a brutal work environment and very long hours, so there is quite a bit of turnover, which can work in your favor.
Q: Thanks for walking through the exit opportunities before I even asked!
Any final thoughts on finance in Ireland?
A: It is a great country to live in, but not necessarily the best country to work in.
One of my mentors regularly advises young people to get experience at big companies in the major financial centers first, and then think about coming back here if they want a better lifestyle.
Working here is a trade-off: you work less and you work with nicer people in a more relaxed environment, but your compensation and exit opportunities are both inferior.
Employment legislation is also heavily in employees’ favor here, which may help you, but which may also hurt you when you get stuck with that incompetent manager who can’t be fired.
Q: Well, on that positive note, we should wrap up this interview.
Thanks for your time and for sharing all this information with us.
A: My pleasure.
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