Large-cap deals turbo-boost Benelux buyout market

Overall buyout activity in the Benelux region reached its second highest level on record in 2018 in terms of buyout value, with aggregate enterprise value of €28.6bn in the region – compared with 2007’s €35bn. On the other hand, at 102 deals announced, volume was just below the previous year’s figure of 107.

In 2018, Benelux hosted Europe’s fourth largest private equity buyout ever, Carlyle Group’s €10.1bn carve-out of the speciality chemicals division of AkzoNobel. However, removing that enormous deal from the figures, aggregate deal value of €18.5bn remains the highest figure seen in the Benelux market since the pre-crisis years. This is mostly due to sustained large-cap activity: in addition to the AkzoNobel deal, there were seven large-cap deals with a combined enterprise value of €11.3bn.

It is tempting to assume the large-cap figures are an anomaly. However, in terms of volume, large-cap activity in 2018 did not differ greatly in comparison with recent years. In the 2015-2017 period, there were an average of 6.6 deals valued at more than €500m per year. In this sense, this year’s volume of eight such transactions is not a significant increase.

Asked whether he expects a decrease in large-cap activity, Lennard Keijzer, a partner at De Brauw Blackstone Westbroek, says: "The region hosts a good number of large assets and I would expect more large-cap deals to take place in 2019. No doubt, current volatility on the stock markets makes investors itchy, but the fundamentals are still good for large-cap deals."

In fact, 2019 already appears on track to start with an imposing large-cap buyout, with the Dutch press reporting that several strategic buyers and a couple of private equity houses are eyeing the Netherlands-based Eneco, a natural gas and electricity supplier with an anticipated valuation of around €3-4bn.

Combined value in the mid-market (deals valued at €25-500m) reached €6.5bn – not as high as 2015’s €7.6bn, but higher than the figure recorded in both 2016 and 2017, which each posted values of around €5bn. Volume, on the other hand, has remained largely unchanged: the past four years have seen relatively constant activity at around 60 deals per year.

At the lower end of the value scale, the small-cap space saw deal value of €597m in 2018 across 34 transactions, similar to the aggregate figure from 2017. However, both years displayed a stark increase in activity compared with 2015-2016, which averaged €328m across 23 deals.

Monitoring Brexit
Alexandre Neiss heads Benelux debt origination for the corporate and acquisition finance team at Investec. Asked what private professionals investing in Benelux are making of Brexit, he says: "GPs with portfolio companies exposed to the British economy are carefully following the latest developments. Having said that, in terms of debt providers, there is no need to have a licence to lend in the Netherlands, so, at least from that perspective, UK-based debt providers will be covered, even in the case of a no-deal Brexit."

The region is expected to be influenced by Brexit, not least because the UK is a crucial trade partner for Benelux countries. Highlighting the extent of UK trade relations, in December 2017 the port of Rotterdam announced that the UK is its second highest country of origin for volume of goods shipped, behind Russia. It is also fourth in terms of throughput, behind Germany, Belgium and Russia.

On a more positive note, the Benelux region might well find itself welcoming companies leaving the UK after its departure from the EU. This point was publicly discussed in October 2018 in the Netherlands, when the Dutch foreign minister Stef Blok deemed Brexit a "lose-lose situation", but openly conceded there might be some advantages for the Netherlands as a result.

Indeed, in January, EU regulator The European Medicines Agency became one of the first organisations to officially close its London offices and move a reported 900 jobs to Amsterdam. Whether private equity investment will follow the agency’s lead will be determined by how the industry responds to disruption. It could conceivably grasp the new opportunities that Brexit might bring.

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