2020 Outlook: Benelux dealflow breaks records as fundraising recovers

While often out of the European private equity limelight on the deal-making side, the Benelux region quietly posted an excellent 2019: last year's 130 buyouts, which collected an aggregate value of €20.3bn, surpassed 2018's volume of 107 and represented the highest volume posted since the pre-financial-crisis years, having surpassed 2007's 110 deals. A surge in volume is largely due to 17 more deals in the €25-250m EV range compared with the previous year.

Nevertheless, local players know that finding the right assets at the right price remains challenging. Gilde Equity Management partner Bas Glas, operating in the lower-mid-market, says that even towards the end of Q4 last year, a good number of companies came to market, but of very diverse quality. Some are sold at high prices, despite the fact that they have only recently shown a step up in profits, or expect one imminently. Judging critically is key, he says: "I do not think the quality assets are gone, but the last few years have been prolific for exits, and many great assets have been sold, so they have just become scarcer."

The Benelux region has a very stable economy and there are no signs of the region suffering a recession shortly, but GPs have started to think more on the potential vulnerability of the assets they are about to acquire, according to Glas. Contingency scenarios are being considered more than before, he says: "It has become increasingly important for sellers and management teams of companies to get a GP on board that has the capabilities and stamina to support the business, even when things do not go as planned."

In aggregate value terms, the large drop in 2019 from €28.9bn to €20.3bn can be entirely attributed to one deal: the €10.1bn carve-out of AkzoNobel's chemicals division in 2018. Nevertheless, nine deals valued in excess of €500m collected €11.5bn in 2019, meaning the large-cap space alone surpassed the €10bn threshold for the third year in a row, marking a departure from the 2008-2016 period. Hogan Lovells partner Wouter Jongen adds that pre-emptive offers have been a feature in the upper-mid-market and large-cap space, but that discipline remains. With regards to debt financing in this market segment, Jongen indicates that banks have been more conservative during the past 14 months, providing private debt lenders greater leeway in this market segment.

Fundraising comeback
Strong deal activity has marched hand in hand with a slight uptick in fundraising, with seven funds collecting almost €1.8bn, following a quiet year in terms of final fund closes in 2018 (just €620m aggregate value raised across six funds). Ergon Capital Partners, whose last fund had closed in 2010, held the most prominent fund close, with Ergon Capital Partners IV collecting €580m. It was followed by Nordian's Fund III (€320m), Vendis Capital III (€300m), and Gilde Healthcare Services III (€200m).

A number of established regional players held final closes in 2016 (Parcom, Bencis, H2 Equity Partners and Vendis Capital), as well as in 2017 (Waterland, Egeria, Avedon, Gilde Equity Management, Main Capital and Mentha). The following year was very quiet in terms of final fund closes, but 2019 saw a couple of these aforementioned players return to market: Vendis closed its new fund and Main Capital launched its Main Capital VI fund in the summer. The latter vehicle collected €535m by December and is expected to hold a final close in Q1 2020 on €564m; that would be more than double the size of its predecessor, which closed on €236m in 2017.

Another fundraising update to keep an eye on is the close of Gilde Buy Out's sixth fund, which the Dutch press reported as being on the fundraising trail since early 2019, targeting a €1.5bn final close. If that target is hit, this vehicle would represent a step up in terms of size compared with Gilde Buy Out Fund V, which closed on €1.1bn in Q4 2015.

With regional players likely to wrap up their latest efforts, and others back on the trail, all signs point to 2020 seeing a fundraising uptick after a quieter 2018-2019 period – potentially fuelling a sustained increase in deal activity, should GPs remain confident in the region's medium-term outlook. 

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