Deal-doing slump threatens Benelux exit momentum

As reported by Unquote in February, the Benelux region was fertile ground for incoming investments in 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. And even though aggregate value did take a tumble from 2018's €28.9bn, that was entirely down to the €10.1bn carve-out of AkzoNobel's chemicals division that year.

However, this forward momentum was not confined to the buy-side. According to Unquote Data, GPs divested (or partially realised) 90 assets in the region last year. This level of exit activity had not been seen since 2015's 97 divestments, making 2019 the third busiest year on the exit front in the past decade. And more importantly, it built on the upward trend initiated three years ago, after the eerily quiet 2016, when just 55 exits were recorded.

Granted, aggregate value for exits did also drop last year, mirroring the statistics on the buyout front. But this was mostly down to the $8bn IPO for Adyen – and to a lesser extent 3i exiting its long-held stake in bottler Refresco as part of PAI and BCIMC's €3.3bn take-private – taking place in 2018, rather than a drop-off in the smaller deal brackets in 2019.

Indeed, highlights of the past 12 months included Blackstone exiting Armacell as part of a €1.4bn sale to PAI Partners, and the divestment of a €1bn minority stake in Action to Hellman and Friedman. Lower down the value range, Towerbrook sold its majority stake in Metallo to Aurubis in a deal that gave the company an enterprise value of €380m, while Main Capital Partners sold its majority stake in Roxit to PE-backed software provider Visma for a reported €100m.

As these examples indicate, Benelux assets remained attractive to both trade players and private equity houses. In fact, the region featured a high proportion of secondary buyouts in the exit routes recorded, compared with some of its neighbours – nearly 30% of all exits in the region last year were to a fellow GP, slightly above the pan-European average of 26%.

Main exit
Looking at the divestments recorded so far in 2020, that mix does not show signs of changing drastically, although SBOs have accounted for a slightly lower share of all Benelux exits in the first weeks of 2020. However, volume overall has been rather subdued – which is not entirely unusual for Q1 in the region.

Any sluggishness in Q1's exit market will not be down to Main Capital Partners. The GP announced two trade sales in quick succession in February, starting with that of Dutch compliance software developer The Patient Safety Company to US-based healthcare software developer Symplr, which is backed by Clearlake Capital and SkyKnight Capital. Shortly after, Main transacted once again with Norway's Visma, this time selling its majority stake in credit management software company Onguard. The GP stands to make a double-digit money multiple on the exit, with IRR substantially above 20%.

But it was IK Investment Partners that scored the largest exit of the quarter so far, selling its majority stake in CID Lines to US-based Ecolab. A source close to the situation confirmed to Unquote the deal was valued between €450-500m.

Meanwhile, local players will no doubt keep their eyes on a few processes currently underway. Notably, PAI Partners has hired Rothschild to conduct the sale of Dutch holiday park operator Roompot Vakanties, according to Unquote sister publication Mergermarket, which cited four sources familiar with the situation. The process is scheduled to launch in H1, with the asset expected to change hands for as much as €1bn. PAI has owned Roompot since 2016, when it backed a €503m buyout from Gilde and BNP Paribas Fortis Private Equity.

Still at the upper end of the market, Rothschild has also been linked to another potential process, this time for Cinven's majority stake in Luxembourg-headquartered industrial and construction safety specialist Tractel, according to French publication Capital Finance. The report cited a source that said the auction was expected to start in March, based on EBITDA of €50-55m. The group was bought by Cinven in 2015 for €350m.

Of course, a major question mark remains the eventual impact of the escalating coronavirus crisis – especially in sectors such as leisure, transportation and education. Most European market participants contacted by Unquote and its various sister publications in recent days expect processes across the board to slow down significantly – or be shelved altogether in the worst affected sectors.

With the the impact of the pandemic on the wider economy becoming increasingly evident, it remains highly unlikely that Q2 will see the exit momentum driven further, although deal-doers will remain hopeful that the pipeline resumes relatively unscathed further down the line.

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• Topics
• Benelux
• Exits
• Unquote Data
• Exclusive
• coronavirus