Competitive 2016 ahead for booming Benelux

With still one month to go, recent unquote" stats paint a decidedly flattering picture for Benelux private equity in 2015. As of late November, the industry has invested a combined €14.2bn across 102 deals; more than twice the €6.6bn recorded one year ago and far ahead of the €7.3bn, €4.4bn and €8.1bn seen in 2011, 2012 and 2013 respectively.

The uptick was spearheaded by the Netherlands, where aggregate value exploded from €2.7bn for January to November 2014 to €10.3bn in the same period in 2015. The dramatic uptick can in part be explained by TDR Capital's €3.7bn buyout of fleet leasing business LeasePlan in July, as well as Antin Infrastructure's €875m secondary buyout of Eurofiber and Apax's €730m take-private of Exact in April.

A prosperous 2015 for the Netherlands resonates with Charly Zwemstra, managing partner at The Hague-headquartered GP Main Capital. According to Zwemstra, the year has been characterised by healthy indicators throughout the industry, including fundraising, new investments, bolt-ons and divestments. While expectations are high that the strong performance will continue into 2016, Zwemstra hints at the continued unease around interest rates and fluctuating stock markets in the coming year.

According to NautaDutilh partners Ruud Smits and Joost den Engelsman, IPOs found their footing for Dutch private equity in 2015, with GPs increasingly setting up dual processes. However, in terms of new deals, local private equity houses struggled to outplay foreign peers and corporates in auction processes during 2015, Smits and Den Engelsman add. But those sticking to a buy-and-build approach have fared better in sourcing deal opportunities.

For 2016, the Nauta partners believe the industry will focus on Dutch IT, life sciences, retail and consumer goods businesses. They also predict an increasing amount of investor attention will come from abroad, particularly the US, and will target under-priced spin-offs from conglomerates: "There are expectations for bargain hunters such as Triton and Platinum to be very active with assets such as Stork. Signs of this development were already visible in Q3 and Q4 2015, with Nordic Capital's acquisition of ABB's Full Service Business and Parcom's and Endless's purchases of Imtech parts."

Belgium on an even keel
While activity in the Netherlands has taken off, Belgian private equity has stubbornly replicated 2014 figures. With 34 transactions worth a combined €2.4bn over January-November 2015, the country closely mirrored the 33 deals and €2.35bn aggregate value recorded during the same period a year ago. 

However, the country has enjoyed a strong exit environment, according to a representative from local GP Gimv, with trade sales pushing up the numbers. While "cautiously optimistic" about what lies in store for 2016, the source warns that Belgian GPs would be wise to keep an eye on faltering European GDP growth and competition from crowdfunding initiatives and family offices, which have recently set up shop in the country.

"It is becoming increasingly difficult to find good targets," echoes Elke Janssens, who heads up NautaDutilh's private equity team. EBITDA multiples in the 10x area are becoming more commonplace as Belgian GPs are forced to fend off foreign competition, particularly from cash-rich Chinese funds, she adds.

In spite of the challenges, Janssens foresees an encouraging 2016 for Belgian players, who will likely benefit from the expected privatisation of giants such as Bpost, Proximus, VRT and NMBS, among others. In line with recent developments in neighbouring France, another Belgian highlight will be the startup ecosystem, with sectors including life sciences and technology poised to lead the way. Both segments have experienced a healthy 2015, with the recent €28m series-A for regenerative tissue spinout Novadip and the $10.2m series-B for intelligence software developer Ngdata.

Regulatory challenges ahead for Luxembourg
Between January and November 2015, stability was also the defining theme for Luxembourg, where gross value remained around the €1.5bn mark in spite of dealflow climbing from five to eight transactions. In line with its traditional funds-heavy nature, the Grand Duchy drew the industry's eye thanks to growing appetite for its SCSp vehicle, a post-AIFMD favourite for an increasing number of private equity players.

However, Luxembourg's dominance when it comes to domiciling funds will likely be put to the test in 2016 as competition intensifies abroad, with Jersey and Guernsey expected to be granted AIFMD passports. In addition, there are regulatory challenges to watch out for, according to Nauta partner Ezechiel Havrenne: "One challenge will be the EU implementation of OECD's base-erosion and profit-shifting rules and the effect that will have on intermediary structures used by the private equity industry."

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