Usual suspects working hard in sedate Benelux market

Greg Gille
01 June 2016

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Despite continued efforts from the region’s stalwart investors, Benelux saw lacklustre dealflow in the first quarter of 2016, with few signs that final Q2 figures will do much to reverse this trend. Greg Gille reports

According to research from the unquote" proprietary database, there were 27 transactions in the Benelux region involving closed-ended funds in the first three months of the year, worth an overall €1.2bn. This marks a 29% drop in volume terms from the 38 deals announced in the first quarter of last year, which amounted to an aggregate €2.67bn.

More worryingly for institutional investors looking to put money to work in the region, the Q1 2016 figures confirm a downward trend initiated after a peak in Q2 last year: the third and fourth quarters of 2015 saw less dealflow, even though aggregate value was more unpredictable given the impact of a few large transactions.

A silver lining for local investors is that pricing for buyouts in the Benelux region seems to have moved back towards the lower, long-term average"

Looking more closely at figures for the first quarter of this year, the buyout segment, in particular, is the one that suffered the greater setback compared to the same period in 2015. GPs completed 10 transactions in the first three months of the year, amounting to a combined €1bn, compared with 17 buyouts worth an overall €2.6bn in Q1 last year.

The Benelux countries were not the only ones seeing tepid levels of action in the first quarter, though. According to the latest issue of the unquote" Private Equity Barometer, a total of 348 buyouts were completed across Europe in Q1, the lowest number seen in the past 10 quarters and more than 30% below the sample's peak of 506 in Q4 2014. These transactions were valued at €16.3bn, which is 54.2% short of the €35.6bn transacted over the preceding three months.

One silver lining for local investors is that pricing for buyouts in the Benelux region seems to have moved back towards the lower, long-term average following a surge in Q2 last year, which coincided with the higher levels of buyout activity in the region. According to the Multiples Heatmap research project, published by unquote" in association with Clearwater International, the average EBITDA multiple at entry settled back in the region of 9.4x in the third quarter last year, compared with 11.5x in the previous three months.

Data is currently being compiled for the fourth quarter of 2015, but preliminary findings would seem to confirm the trend witnessed in Q3, with multiples more in line with historical averages in the region. It remains to be seen whether the even lower level of activity in recent weeks will maintain the region's status as a more affordable market compared with the European top tier of the UK, France and the Nordic region, or if the greater scarcity of attractive investment opportunities will result in more costly bidding wars.

Gimv, Gilde leading from the front
Opportunities might be more scarce, but the more prominent local investors do not seem phased and have continued to stick to a busy deployment and divestment schedule.

At the lower end of the market, Gimv had secured five transactions at the time of writing. Most recently, the firm backed Dutch welding technology supplier Arplas in a €10m MBO. Earlier this year, Gimv acquired Dutch climate control businesses Itho Daalderop and Klimaatgarant, with plans to merge both assets. According to the Benelux firm, its investment is one of the largest it has ever carried out in the Netherlands.

And Gimv has also been busy on the exit side. The firm was most notably part of the investor consortium that exited Belgian powertrains manufacturer Punch Powertrain in a sale to Chinese group Yinyi. The deal is understood to have valued Punch Powertrain at around €1bn, given the €500m turnover and €100m EBITDA forecast for 2016.

Another mainstay of the Benelux market, Gilde was slightly less busy in the first five months of the year but still managed to deploy capital in three transactions, with the highlight being Royal Reesink. Gilde, alongside other existing shareholders in the Dutch agriculture machinery specialist, launched an offer to fully acquire the business prior to a move from Alternext Amsterdam to Euronext. The purchase will be financed via a €279m mix of equity and debt; Gilde, Todlin and Navitas committed €109m in capital.