Acquisition finance remains plentiful, especially for growth oriented businesses, but higher debt costs have pushed down valuations, according to the head of private equity firm Waterland’s Irish arm.
The Irish State’s Ireland Strategic Investment Fund (Isif) is among backers of Waterland’s new €4bn of pan European funds, which is being announced on Thursday after closing oversubscribed, and the firm is an increasingly busy investor in Irish businesses. Irish-head Laura Dillon said she expects to make investments here over the next two to three years from the new, ninth, pan-European fund.
Waterland said its ambition is for as much capital as possible to be deployed in the Irish market.
Previous deals here include buying a majority stake in Mullingar-based fire protection systems business Writech. In 2021, Waterland invested alongside the family owners and has since backed significant expansion, including the latest acquisition of Gem Pumps in the US on top of bolt-on deals in Sweden and the UK. The Writech expansion fits Waterland’s “preferred MO of a partnership approach with owners and management”, Ms Dillon said.
Waterland was established in the Netherlands more than two decades ago and it established an Irish arm in 2019.
Isif is one of a range of investors in the new funds, which are a mix of asset managers, public and private pension funds, insurance companies, sovereign wealth funds, endowments, foundations and family offices.
Isif Director Nick Ashmore said the partnership with Waterland was a further step in providing Irish businesses with attractive new ways to source the capital to grow and gave valuable access to Waterland’s Irish and international expertise and network.
“This investment is another example of Isif’s mandate of investing for a commercial return while supporting economic activity and employment in Ireland and we’re delighted to team up with Waterland,” he said.
Commenting on the acquisition market the new fund will be deployed into, Ms Dillon said that while there is still a lot of capital available, the focus of investors has been shifted by factors like the war in Ukraine and a rising interest rate environment.
“Valuations are beginning to come down a little bit and there will be a period of adjustment to that for owners,” she said.
From a high in 2021, deal flow was down last year and the increasing cost of debt will likely bring valuations down, she said.
However, she said businesses targeting expansion can still access funding and that the uncertain economic outlook may spark some owners to bring in partners and outside backers in order to take money off the table without exiting their businesses, she said.
Waterland’s portfolio in Ireland includes nursing homes operator Silver Stream Healthcare and MTM Engineering, a Meath-based leader in turn-key cable installation and termination services.
