Belgium leads the pack to head off stagnation fears

The majority of transactions in the Benelux region from the latter half of January have taken place in Belgium, which looks poised to experience a surge in private equity activity over the course of the year.

Venture capital and private equity dealflow in Belgium remained steady in 2013 compared with previous years. There was a bright spot for the venture capital industry on its own, however: the value of early-stage and expansion deals increased by at least €55m compared with 2012, according to unquote" data, despite the same number of transactions taking place in both years.

The figure was no doubt helped by the several large funding rounds that took place in the country last year. In June, Gimv and the Regional Investment Company of Wallonia jointly invested €40m in gas and green electricity provider Lampiris. CM-CIC Capital Finance injected €20m into Flanders-based industrial laundry systems manufacturer Primus in February, while Belgian biopharma Cardio3 Biosciences secured €19m in fresh equity and the conversion of convertible loans from a syndicate of existing investors in May.

Players are feeling increasingly bullish about the small, largely untapped market

The Netherlands, on the other hand, experienced the polar opposite. The number of venture capital deals in the country increased by almost 35% year-on-year, but overall value remained despondently flat.

Surprisingly, however, the Netherlands saw a surge in the number of international venture firms deploying capital in the country. According to unquote" data, almost twice as many foreign venture capital firms executed deals in the Dutch market last year when compared with 2012. Belgium, on the other hand, experienced a year-on-year decrease of more than 60% in foreign investment.

Across the board, the most favoured sectors in Belgium for both funding rounds and buyouts in 2013 were technology, healthcare and industrials. While the highest number of deals took place in the healthcare space, the largest pool of capital went into the industrials sector thanks to the €320m buyout of airfield ground lighting manufacturer ADB Solutions by PAI partners in March and the €110m buyout of helicopter transport company Noordzee Helikopters Vlaanderen Group by Ardian in December.

A promising start
Already, activity within Belgium's private equity industry seems to be moving at a faster pace this year than 2013. In mid-February, Belgian buyout firm Kebek Private Equity acquired Ghent-based contact centre operator Mifratel, picking up a stake of more than 90% in the company from its founder, Kristel D'Hondt, and investment firm Arkafund.

Furthermore, CM-CIC portfolio company Primus was sold to Alliance Laundry, a US company backed by Teachers' Private Capital.

Within the country's venture capital market, retail and consumer brand-focused investor Vendis Capital picked up a majority stake in Brussels-based jewellery designer Victoria Group.

But the Netherlands has experienced some activity since the start of the new year. In February, Dutch gene therapy company uniQure – backed by Forbion Capital Partners, Gilde Healthcare, Coller Capital and Advent Venture Partners – raised $91.8m in its IPO on the Nasdaq.

And Rabo Private Equity-managed Mainport Innovation Fund injected €1.2m into MI Airline, the Dutch developer of a tablet app for airline cabin crews.

The news from CBS – the Netherlands' national statistics office – that the Dutch economy grew by 0.7% in the last quarter of 2013 could signal the possibility of higher-value dealflow picking up in the country again - but only if the figure is enough to make Benelux's cautious investors regain their confidence in the region's largest market.

Overall, the Benelux region is in danger of stagnating unless one of its markets picks up in 2014. And all signs point to Belgium leading the Benelux pack in the next 12 months, thanks to the arrival of new players, a promising start to the year and encouraging economic figures.

In the meantime, wary investors will continue to watch the Netherlands' market from the sidelines to see which way the Dutch economy will swing in 2014 before pouring larger quantities of capital into the country.

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