The Interview with Ian Kerr and Conor McCullough, founder shareholders of Beltrae Partners
Recently Jeff Schmidt, CDI Global Executive Managing Director and Chief Executive Officer, spoke with Ian Kerr and Conor McCullough, both founder shareholders of Beltrae Partners, CDI Global’s latest partnership.
The conversation covered a wide range of topics from the history of Beltrae Partners, economic outlook and market trends, to cross-border acquisitions and divestitures involving companies based in Ireland and the United Kingdom.
Jeff Schmidt:
Welcome Conor McCullough and Ian Kerr of Beltrae Partners based in Belfast and Dublin. Thank you for joining me today. I am looking forward to learning more about Beltrae and its development.
Conor McCullough:
Thank you, Jeff. The Beltrae team includes 6 Directors, 4 shareholders, and 2 associate directors. We're active in Ireland, North and South, and active in the UK, Europe, and the U.S. We've built strong mid-market VC connections in the UK and the U.S. That's where we are today as we look to the future.
Jeff:
Tell me about the background of your team members.
Ian Kerr:
My background is “pure” corporate finance. I worked at JP Morgan and was a partner with Price Waterhouse Coopers running the corporate finance team in Northern Ireland. Conor comes from the sales and trading side of JP Morgan and then moved into working for one of Ireland’s leading financiers, Dermot Desmond at his business, International Investment and Underwriting (IIU). At IIU Conor moved into private equity investing.
Ian:
Two other executive directors in Beltrae are David McCloy and Matt McCullough. David trained as an accountant with Ernst and Young and then worked on their corporate finance team. We first met David about 21 years ago on a transaction and he joined us immediately after that. He's been with Beltrae for over 20 years now. Matt was an international rugby player for Ireland. After a series of injuries, he went back to university and did an MBA. Later, he worked in Barclays Investment Bank in London.
We also have two non-executive directors. They were former clients who we took through a very large MBO of Belfast International Airport and they have co-invested with us in the 23 personal company acquisitions we have made.
We have two Associate Directors – James Donnelly, is a chartered accountant who joined us over two years ago from KPMG’s corporate finance team. Dan McCrea is also a chartered accountant joined us about five months ago. Dan previously worked in the transaction support team at KPMG and then latterly at Deloitte.
So, we have a mixed team of people who come from investment banking, accounting, private equity and from industry.
Jeff:
Could you describe Beltrae currently in terms of business mix and the types of transactions that you focus on? What's the “sweet spot” in terms of the transaction size that you pursue and handle?
Maybe you could also discuss Beltrae’s industry specialization. And, considering CDI Global's cross-border focus, perhaps, describe your capabilities and successes in cross-border deal making.
Ian:
We execute about 20 M&A deals a year. Nineteen of those, on average, would be on behalf of clients, and we do about one per year on our own account using our own personal capital. We have acquired or invested directly in 23 companies over the last 22 years.
In terms of the M&A advisory, our sweet spot are deals valued anywhere between £5m and £50 million, which is over $70 million in deal value.
The scale of the economy on the Island of Ireland would explain transaction values of that size. Notably, we have completed a number of deals valued at more than £100 million (o$130 million). The area of expertise we have carved out for ourselves would be private equity, led cash-out deals.
An example would be a private company in which the shareholders’ net worth is tied up in the business. Often, they'd like to get cash off the table and continue running the business. We've done a number of those deals with private equity firms based in Dublin, London, or other parts of the UK. Deal value sizes range anywhere between £50 and £150 million.
We're probably doing two or three of these deals a year. Our approach is very popular because there are lots of young entrepreneurs in our markets.
In Ireland, entrepreneurs want to “de-risk” their lives, but they don't necessarily want to retire and go lie on the beach. They've got a business that they can still take to another level by having someone else's chequebook help them do so.
Since we set up Beltrae Partners we have completed over 400 M&A deals, with many of these being cross-border transactions, especially involving transatlantic parties. US buyers are frequently acquiring businesses located in Ireland, giving them a “bridgehead” for accessing the European market.
That said, many buyers come from Great Britain and to a lesser extent, but still quite active, we would have buyers coming from the European Union.
We see fewer buyers coming from the Far East. In terms of the sectors that were active in, technology and technology led service companies are core strengths.
Among technology-enabled service companies, financial services are an important sector for us. Agriculture, food, and general manufacturing together with technology are the four industry sectors that we would see a lot of activity in on the Island.
We've also had extensive experience in the property sector as well and particularly after the financial crash in 2009. In 2009 and 2010, there were extensive distressed property assets which created the opportunity for refinancing transactions. U.S. investors were especially active in acquiring distressed properties.
Jeff:
Beltrae operates across the Island of Ireland which means you operate in the EU through the Republic of Ireland, and you operate in Great Britain, which is not a part of the EU. Does this complicate the advisory work you do? How do you manage differing regulatory , political, and economic conditions in completing transactions?
Conor:
Doing business across the breadth of the Island of Ireland requires knowledge and sensitivity in the sense that one part of the Island is run from GB and is not part of the EU and the other part is in the EU.
However, this situation probably represents an opportunity as much as a challenge. We've always had two offices: one in Dublin and one in Belfast. Initially , we were regulated by the UK because most of our business in the beginning was in the UK.
The UK regulator would allow us to “passport” our activities into the Republic. That’s how we operated seamlessly until Brexit.
Even today, there's no “border” on the Island, no tangible business border. However, there’re two different currencies (the Euro and the British Pound) which we don’t find to be an issue because people are very used to trading between the two currencies and the pertinent regulations were effectively European regulations until 2016.
From 2016 to 2020, there was a lot of politics around what kind of deal Brexit would end up in, particularly in terms of the relationship with the EU. There was hesitation in the market at the time about the future of certain industries and certain tariffs, etc. But politics have played out, and as you know, business is pretty smart at finding a way to operate within a new situation.
We're now regulated in the South of Ireland by the Central Bank of Ireland and we are still regulated in the N.Ireland as we always were by the FCA.
We don't handle client money, so regulation is not particularly heavy in terms of what we're allowed and not allowed to do.
Our personal view is that it would have been preferable if the UK hadn't left the EU. But then, Brexit hasn't made much difference in terms of deal flow.
And the end-result, if you look at Brexit from a different perspective, is that we've got a foot in both the UK and EU. This is important because Beltrae is very connected to the UK market, which is a huge market, but at the same time, we're also 100% connected to an even bigger market, which is the European Union.
Both the economies of North and South are complementary, but slightly different. The North is filled with family-owned businesses with a slight emphasis on agriculture. The South, since joining the EU, has grown very, very fast and has a particular expertise in pharma and Information Technology (IT) , which is huge business here. The South has a strong international focus, particularly with the US. These relationships go back hundreds of years as we know.
US businesses are interested in Ireland for lots of different reasons, both cultural where the connections run deep, and business, as Ireland has a young highly educated English speaking workforce, and the Governments tend to be pro-business. Ireland has been a big beneficiary from the interest U.S. companies have shown both the North and South over the years.
It’s been a bumpy ride in some ways, but right now we're positioned well for handling all business coming into Ireland, North and South.
Jeff:
How might tariffs affect Irish companies?
Conor:
Manufacturing in the US is something Irish companies with significant exports and revenues in the US are going to have to consider. Establishing a manufacturing base, or acquiring a company in the US, would be a way of getting around some of tariff issues that might arise.
Somehow, companies may need to find an ownership structure which brings them physical manufacturing capacity in the US.
Jeff:
Does Ireland, either the North or the South, appeal to private equity firms looking to invest in Europe?
Ian:
For private equity coming from the US, probably the sector that would attract them already does attract them – that is, the whole technology sector. There are many good companies, both in the North and South, which have been acquired by companies which are private equity-backed from the US or have taken investment directly from US based private equity firms.
Beltrae invested directly in a technology company and we're in talks currently with US private equity firms regarding that company.
Ireland has very smart people, a lot of very smart technology, a lot of very smart ideas. So, the technology sector is fertile ground for PE firms looking for a broader portfolio of technology businesses.
Jeff:
As you look ahead, what are your aspirations for membership of CDI Global
Conor:
We want Beltrae to continue to grow, but sustainably. That said, we've never been obsessed with growth per se. We want to make sure the quality of client service is paramount., So we want to grow properly, and we want to retain a very flat organization.
Everybody working in the company feels a strong sense of ownership and has the freedom to be creative.
Geographically, we're going to remain an “All Ireland” company because doing so we get the best of both worlds. As we've explained, we're in a very pro-European country in the South and we're also in a country that is physically, politically connected with the biggest market for Ireland, which is Great Britain in the North.
Our position is effectively the best of both worlds in terms of the CDI network, in which we partner with like-minded dealmaking companies, people who want to do deals across the globe.
We want to share resources with the CDI member firms and share success in a collegial fashion. We want to add value to the brand where we can and help to grow the value of the CDI brand over time.
The best outcome is we add value both in terms of originating and doing transactions and add value by participating in CDI leadership teams.
Ian:
We're used to working in a very collegial atmosphere. We've always operated with one bottom- line. We work North and South wherever the projects are required. A collaborative working ethos is very much ingrained within Beltrae.
As part of CDI, we can offer companies unmatched advice and professional expertise in coming to Ireland. We can open the door to virtually any company in the North or South for investors.
Jeff:
On behalf of the CDI Global Network, we are thrilled to have Beltrae as a strategic addition to our network.
We look forward to your contributions to leadership and direction of this network and to working on many future cross-border deals with you both inbound and outbound.
Ian and Conor:
Thank you Jeff, we look forward to a great partnership
