Benelux large-cap activity swells in H1

Since January 2018, the Benelux region has seen seven deals executed in excess of €500m, with a total value of €18.75bn. The large-cap activity in the region is derived from several factors, says one industry insider: "The economy is doing particularly well, allowing companies to grow steadily, so very good assets are available." Core Equity Holdings principal Bart Wouters says: "Prices are very high and the debt market has never been so accommodating. Compared with a couple of years ago, high-quality businesses are more expensive – a few deals that could have been categorised as upper-mid-market, are making it into the large-cap [category]."

Of course, the second largest ever recorded buyout in Benelux – the €10.1bn acquisition of AkzoNobel Specialty Chemicals by The Carlyle Group and the Government of Singapore Investment Corporation – skews value figures to a certain extent. Nevertheless, setting this deal aside, the six other large-cap deals in 2018 so far amount to €8.65bn, showing that large-cap activity as a whole is looking active.

In fact, H1 has shown indications that this year's large-cap aggregate value is on track to reach its highest level since 2006 and 2007, which saw €23bn and €28.9bn in aggregate large-cap deal value respectively. That biennium similarly saw a few mega-deals – Netherlands-based NXP Semiconductors and The Nielsen Company were each valued at more than €8bn in 2006, while BC Partners led the €12.3bn acquisition of Luxembourg-based satellite operator Intelsat the following year.

Compared with a couple of years ago, high-quality businesses are more expensive – a few deals that could have been categorised as upper-mid-market, are making it into the large-cap [category]" – Bart Wouters, Core Equity Holdings

Although value is reaching interesting peaks, volume-wise the situation is less clear-cut. This year's dealflow of seven does not differ greatly from the nine seen in 2015. The number of deals seen over the course of the rest of the year will determine whether the Benelux large-cap space will reach the heights of 2006-2007, perhaps approaching 2007's record of 15 deals closed. For now, Advent's Dutch software developer, Unit4, is in the pipeline, with Bain, CVC and KKR named as bidders, as reported by Unquote sister publication Mergermarket.

Activity is booming but competition is tough, due, in part, to the entrance of new players in the market. "Sovereign funds, foreign pension funds, family offices and pan-European private equity firms that recently started investing in the region are new actors eyeing the large-cap sector," says an industry insider. A good example is the case of EQT partnering with Montréal-headquartered Public Sector Pensions Investments (PSP Investments) for the acquisition of Azelis, the Belgium-based distributor of speciality chemicals and food ingredients, from Apax Partners. EQT has not commented on the deal value, but press reports placed the transaction at around the €2bn mark. EQT opened an office in Amsterdam in 2013 and Azelis is its largest deal in the region to date.

Be prepared
Core's Wouters says that to win deals in a competitive market GPs are focusing on fewer investments, but are taking great care when investing, researching the sector and the business thoroughly. "Once the auction process starts, being able to act quickly has become more important."

Indeed, auctions are often characterised by pre-emptive offers. Lennard Keijzer, a partner at De Brauw Blackstone Westbroek, says such propositions must be compelling and require detailed planning, preparation and execution. "Pre-emptive offers should not be a last-minute decision," he says. "Advisers know the market and the players involved, and can help the bidder distinguish 'must-haves' from 'nice-to-haves' to increase the chance of success."

Despite the positive environment, some large-cap sales do take longer, and some are unsuccessful. An example of this was when UK- and Benelux-based GPs stepped away from a potential takeover of Lion Capital-backed Hema, a Netherlands-based broadline retailer, according to Dutch press reports. "Sometimes sellers overprice assets," says the industry insider. "On the other hand, investors are now bearing in mind that their exit will take place during a down-turn. GPs are therefore selecting the businesses that are likely to be less affected by a difficult economic environment."

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