Benelux trade deals surged in 2018

The Benelux region saw 49 trade sales in 2018, which is a 68% increase compared with 2017 and accounts for 56% of all exits that took place throughout the course of the year. In stark contrast, the region saw just 24 SBOs, a 13% year-on-year decrease, and no flotations, according to Unquote Data.

The year-on-year increase in the number of trade sales was reflective of a wider European trend, with France, Iberia, Italy, the Nordic region and the UK and Ireland also seeing growing numbers. Zeina Bain, managing director at The Carlyle Group, says: "The increase in corporate M&A can be seen as being driven by the rise of shareholder activism in Europe, the push for more alpha, as well as the currency of high trading multiples and relatively healthy balance sheets. For private equity owners, trade sales can be a more reliable route to exit than IPOs, especially in Europe, given greater public market volatility."

However, Benelux has experienced the highest proportional annual growth in trade sale volume of all European regions. This increase in volume affected the small-cap and mid-market spaces most dramatically, with 34 and 12 trade sales respectively, while the large-cap range saw just three such exits.

For private equity owners, trade sales can be a more reliable route to exit than IPOs, especially in Europe, given greater public market volatility" – Zeina Bain, The Carlyle Group

Last year's trade sales totalled €3.8bn in the region in terms of value. The amount is in line with the yearly average of €3.6bn seen in the region between 2013-2017. It is worth noting that a handful of mega-sales skewed numbers in previous years: Waterland's Omega Pharma, and EQT Partners' Bureau van Dijk Electronic Publishing were sold to trade for €3bn and €3.6bn respectively in 2014 and 2017. In comparison, last year's large-cap trade sales were not as hefty. The biggest exit, CVC Capital Partners' sale of Stage Entertainment to New York-based Advance Publications, reached a €1bn valuation, according to press reports.

As a rule of thumb, when both private equity houses and trade buyers bid for an asset, trade buyers traditionally pay higher multiples than GPs, largely as a result of perceived opportunities for synergies post-acquisition. However, in recent years, tougher competition and pressure to deploy has forced private equity to bid higher, competing more aggressively against strategic buyers. In 2016 and 2017, a similar number of trade sales and SBOs took place in Benelux, though exits to trade significantly surpassed the number of SBOs in the 2012-2015 period. In this respect, last year marked somewhat of a return to the norm.

Trade buyers' come-back
Several industry sources told Unquote that private equity houses were highly selective in terms of which auctions they opted to take part in during 2018, especially in the second half of the year. Due to uncertainty related to macroeconomic trends in Europe and the worry of a looming economic slowdown, GPs are looking more cautiously at deals.

Nevertheless, corporates have not diminished their ambitions. Eric Wijs, Lincoln International managing director and head of Benelux, says: "Trade buyers have a more limited scope in terms of companies they can acquire and are still very determined to grow via acquisitions. A surge in trade sales in 2018 implies that strategic buyers have got used to higher prices and were able to beat private equity in competitive processes."

William Ford, investment director at Waterland, explores this point further: "M&A teams of corporates have become more professional. They have started reaching out very early and often are knowledgeable and focused. We interpret this regained confidence by trade buyers as a sign that they have simply adapted to a very competitive market."

The industrial, technology and consumer goods and services sectors were the industries to have seen the most private equity exits to strategic buyers in 2018. The 13 technology trade sales are a notable increase on previous years, as the 2013-2017 time-frame averaged seven such exits per year.

As private equity continues to select deals more cautiously, the large volume of trade sales in Benelux might continue in 2019. Since the start of the year, four such exits have taken place, two of which were technology deals.

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• Benelux
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• Top story
• Belgium
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• Trade sale
• Lincoln International
• Carlyle Group
• Waterland Private Equity