M and A activity in Ireland less exposed to impact of credit crunch due to the size of average deals below Euro100m, according to Bank of Ireland

- Ireland's waste industry estimated to be worth €1.5bn

- Multinationals lead 9% growth in manufacturing

M & A activity levels in Ireland continue to be maintained, despite recent market turbulence, which has given rise to some reassessment of asset values, according to the latest edition of Bank of Ireland Corporate Banking's Irish Business Review, which was published today (7 December 2007). This reassessment is largely driven by uncertainty around the availability and quantity of funding for transactions as well as the impacts from the broader economic outlook.

"It is important to stress that the Irish M&A market is less exposed to the impact of the credit crunch than the larger international markets", according to Pat Gaynor, Managing Director, Bank of Ireland Corporate Banking. "Larger scale deals over €100m are more likely to be impacted by recent market volatility while typical deals in the Irish market are below this level. Some transactions have stalled temporarily as a result of uncertainty in the markets. However, most are expected to proceed in the immediate term but with noticeable changes around price and structure of the transaction".

"Whilst the trend in mid corporate transactions remains positive, implications for Irish business following the credit crunch / lack of liquidity / cash shortage has led to a "reality check" with many businesses taking the time to reassess transactions that had been work-in-progress. This has fed into asset prices and a more realistic approach to raising financing and debt for M&A. Purchase multiples are being assessed more closely in the knowledge that the finance package for the deal may be less generous than before and more expensive to service", he added.

"Despite the recent turbulence the Irish corporate sector has not been impacted significantly in the short term due to the strength of banking relationships that have been established over the years. Businesses are seeking out quality service financial providers which has led to a strong flow of business in the past 6/9 months from a range of sources which has benefited our business. While we are in a period of correction, it is our opinion that well managed businesses with sustainable business models will continue to thrive in any circumstances and will continue to get support from banks".

Waste Sector
Ireland's fast growing waste industry sector is estimated to be worth €1.5bn. The sector is currently experiencing significant mid-tier consolidation driven by the need for scale to drive a return on capital investment, the fragmented nature of the industry and number of large players with significant financial resources to fund acquisitions. As a result Ireland now has a number of ultra efficient recycling facilities that require large volumes of raw materials to generate a return on capital. This has led to increased focus on scale for the sector which has resulted in an accelerated pace of M&A activity with a significant number of transactions completed since May.

Bank of Ireland Corporate Banking has been active in the environmental and renewable energy sector. Recent transactions undertaken include; acting as lead arranger for £155m debt facilities for waste-to-energy plan in Slough, England, a waste treatment facility for Lancashire County Council (£340m), wastewater treatment facilities in Northern Ireland (£160m) and arranging debt for a number of new schemes including facilities to treat all 1.3m tonnes of Great Manchester's household waste, which will be the largest waste sector project in the UK.

Sector Analysis
At a sectoral level retailers have continued to benefit from strong consumer spending which has increased by 5% per annum between 2002 and 2006. Over the first half of 2007 real consumer spending increased by approximately 6% on the same period in 2006, broadly in line with the average rate of growth recorded last year. The volume increase in retail sales over the first six months of 2007 was 7.4%, slightly ahead of the growth in consumer spending. This pace of retail spending slowed in the third quarter to around 6.5%. However consumer spending is still on track to increase by 6% this year, the same as in 2006. Growth is expected to slow next year mainly due to slower employment growth. Consumer spending is estimated to increase by 6.5% in 2008.

Retail
A number of areas have performed strongly in the retail sector during 2007. Clothing and Footwear have each experienced an increase in the volume of spending of about 15% over the first seven months of the year, almost double the increase in total retail sales over this period. Prices in these categories have continued to fall over the past year, so the increase in spending in value terms is less than this but remains strong at 12-13%. Above average increases in spending have also been registered in a number of other categories, including Electrical Goods, Furniture & Lighting and Hardware, Paint & Glass with sales increasing by 11%, 8.9% and 9.9% year over year over the period January to August. Slowdown in these categories is expected in 2008 due to the downturn in the Irish housing market. The Bar sector continues to experience difficulties, with spending down 0.5% on the year in January-August 2007 having increased modestly by under 1% in 2006.

Industrial
Output growth in manufacturing has continued to strengthen in 2007. Having increased by 5% on average in 2006, output over the first eight months increased to almost 8% on the corresponding period last year, in response to strong global and domestic demand. The multinational sector has led the way again, with output over the January-August period up almost 9%. Traditional sectors has performed well, accelerating to 4% from an average of just 1.5% in 2006, the fastest pace of growth since 2000. The near term forecast for the sector remains favourable, though output growth is likely to slow given what is likely to be more moderate demand both home and abroad. Goods exports, which are up almost 9% in volume terms to date this year, are likely to increase more slowly in 2008.

Construction
According to the Department of the Environment, house completions over the first nine months of the year totalled just over 56,000 down about 8% on the corresponding period in 2006. Consensus within the industry suggests that final output figures for 2007 may show an even steeper decline than the first nine months suggests. A further reduction in output is expected next year. The decline in completions should be viewed as a continuing adjustment towards sustainable levels of housing building over the medium term - generally considered to be around 60,000-65,000 per annum. The reduction in residential construction will be partially offset by continuing growth in the non-residential sector, including public spending on infrastructure which is projected to increase by over 12% in 2008. Private non-residential construction may increase more slowly near year, reflecting among other things tighter credit conditions.

Hotels and Restaurants
The Hotels and Restaurants sector has continued to operate against the backdrop of a favourable economic environment, both domestically and internationally. The numbers employed in the Hotels and Restaurants sector have risen by almost 7.5% over the past year about twice the increase in total employment in the economy over this period and now stands at about 125,000 or about 6% of total employment.

Agriculture
According to the CSO, the terms of trade for the sector have improved this year. Preliminary estimates show output prices will rise by almost 10% this year, due to sizeable price increases for a range of cereals (up almost 68%), milk (up over 23%) and vegetables (up 11.5%). Employment in this sector, including forestry and fishing, appears to have stabilised after declining in recent years, with the number employed standing at around 115,000 or 5% of total employment.

Ends

Note
A copy of the Irish Business Review is available on request. Additional information on M&A activity in Ireland is available in the report.

For further information please contact:
Anne Mathews
Media Relations Manager
Group Corporate Communications
Bank of Ireland
Tel: +353 1 604 3836
Mob: +353 87 246 0358

Note to Editors
A sample of acquisitions in Irish waste sector 2007