Benelux dealflow all but freezes over in H2

The Benelux region has experienced mixed fortunes in 2016 in terms of private equity activity. After a decent start in H1 with 60 deals, €2.8bn in aggregate value and an average deal value of €47.4m – which admittedly was still lower than H1 2015's 78 deals, €7.1bn in aggregate value and €91.3m average value – the local market witnessed a brutal slump in the second half of the year.

Bearing in mind that Q4 is not fully completed yet and that figures are likely to evolve by year-end, according to unquote" data only 23 deals have so far been recorded since July, with aggregate value down to €2.4bn, though this does represent an average value of €113m.

Although H2 has been slow, I have been encouraged by the bounce back in Q4 in particular, from a dire Q3" – Alexandre Neiss, Investec

"The number of deals has dropped this year and it's definitely visible," says Mentha Capital managing partner Gijs Botman. He adds: "It's quite hard to understand as all the economic signals are quite strong, in the Netherlands at least – the economy is very healthy and there's a lot of money in the market, so you would expect people to be quite pro-active; but things seem to be going differently at the moment."

Alexandre Neiss who focuses on debt origination in the Benelux for Investec's corporate and acquisition finance team, sheds a different light on the situation: "H1 was definitely more active than H2 but that is a consistent story across most geographies. While not the most active market in terms of deals across Europe, Benelux is a consistent performer, and although H2 has been slow, I have been encouraged by the bounce back in Q4 in particular, from a dire Q3.

"Taking a step back, there were of course some political events that might have made investors slightly more cautious, but I haven't seen anything to date that has switched off people's appetite. I think the current slowdown is rather driven by a 'refilling the pipeline' phenomenon, a natural cycle."

The year in deals
Some 2016 deals are nonetheless worth remembering, such as 3i reaping £89m in Basic-Fit's IPO; Prime Ventures' and Macquarie Capital's Takeaway.com acquiring Just Eat's Benelux arm for €22.5m and floating soon after with a €993m market cap; and Flint Capital leading a $20m series-B round for Luxembourg-based job finder app Job Today.

Looking at the Netherlands, the region's largest market, a few events were also noteworthy this year. As highlighted by NVP in a recent report, three life sciences venture capital funds managed by LSP, Gilde Healthcare and Forbion, raised a total of €750m, with two of them breaking the €200m record for funds raised by a single Dutch venture capital fund with €250m commitments. In terms of growth and buyout funds, a total of €1.1bn was raised through seven different funds in H1 alone, the report states, although this amount still stands below the €1.4bn allocated to eight vehicles in H1 2015.

In H1 2016, 54 Dutch companies received a total of €66m in support from venture capital firms, compared to €112m the previous semester. On the buyout front, commitments worth €750m were made via 36 buyout transactions, again down from the H2 2015 value of €1.2bn. "Many bigger Dutch buyout funds completed fundraisings in 2015," NVP's report states, including Waterland and Gilde Buyout, "which could mean that although there is enough capital available, investors are holding back from investing in a context of high valuations, and rather concentrate on their existing portfolios."

2017 – strong again?
Taking the above statement into account, could it be that the relative inactivity dominating H2 2016 was nothing but the calm before the storm that is about to hit in H1 2017? Investec's Neiss is of this opinion. "The deal pipeline for Q1 is looking robust, with four or five deals meant to kick off by year-end or in early 2017," he says.

In spite of the political events in store for next year – including the Dutch and French general elections – and their potential effect on the market, Neiss is also confident the market will remain steady. "No matter what the political event was this year, we have seen a willingness to maintain deal activity particularly in the mid-market, whereas jumbos have stalled a little," he says. "In the Benelux region specifically, there is so much dry powder as it is, both on lenders' and PE's side, that it is clear the market is relatively immune to event risks and I don't see these having a major impact here."

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