A new report from Aon which surveyed 290 businesses across Ireland in Q2 2022 reveals that only one in five SMEs are considering engaging in a merger or acquisition in the next two years, with rising inflation cited as the main risk for engaging in M&A activity.

The short-term outlook is even more stark, with just 7% of business leaders saying they are more likely to engage in M&A activity in the next six months.

This number only marginally improves when the outlook is extended to 12 and 24 months, with only 11% saying they were more likely to engage in M&A activity during those periods.

The vast majority of business leaders say they don’t know, suggesting a ‘wait and see’ attitude amongst most business leaders when it comes to anticipating any possible improvement in the current economic climate.

iReach Insights research probed M&A views from 81 mid-sized SMEs, 86 large SMEs and 123 enterprises with over 250 employees. The report is available to download here.

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While rising inflation followed by high valuations (45%) and lack of sustainable investment options (43%), constitute the main issues for SME owners who are considering engaging in M&A activity, the current geopolitical environment was also singled out as an area of concern, with 39% citing geopolitical unrest as a risk when it comes to engaging in M&A activity.

Meanwhile, for those Irish organisations which are contemplating transactions, key drivers include a desire to increase business efficiencies (39%) and protecting and growing market share (33%). Other key motivators include accessing skilled talent (28%), followed by strengthening the ability to navigate current volatility (20%).

Karl Curran, head of M&A and Transaction Solutions at Aon Ireland, commented that following a stellar year for global M&A activity in 2021, the landscape for M&A has changed again.

“The results are not unsurprising, with just 18% of Irish businesses considering engaging in a merger or acquisition within the next one to two years. This is in contrast to the global outlook for M&A, with Aon’s recent global M&A report revealing that more than two-thirds of businesses expect M&A deal numbers to increase over the next 12 months.

“However, our research also shows us that the vast majority of Irish businesses are undecided, meaning that there is significant potential for increased M&A activity in Ireland once the current headwinds subside.”

Curran added: “The report also offers insights into the evolving attitudes of business leaders across Ireland when it comes to M&A due diligence, with the more ‘non-traditional’ due diligence focus areas, such as cyber security and ESG, growing in importance, though the number of leaders considering these factors is still low.”