Benelux: New investments slow down while large exits abound

Alice Murray
21 March 2016

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Fresh deal activity in the Benelux region has been lacklustre so far for 2016, both in terms of volume and value – but a handful of sizable trade sales could mean Q1 is the highest performing quarter in terms of combined exit value in recent months. Alice Murray reports

The Benelux region appears to be slowing down when it comes to new deals. For the first quarter of 2015, unquote" data recorded 38 deals valued at €2.7bn. Since then, the volume of deals witnessed in the region has steadily decreased, recording 36 in Q2, 30 in Q3, 27 in Q4, and 23 with two weeks left in the first quarter of 2016 at the time of writing.

However, total deal value has been more sporadic, with combined totals coming in at €2.7bn for Q1 2015, rising to €4.5bn for Q2, and even further to €6.5bn for Q3, then falling sharply to €3bn in Q4 2015. And for the relatively fewer deals done at the beginning of 2016, aggregate deal value is even more subdued at just €427m.

Given the slump in new deal activity, it is interesting to see diverging developments on the exit side. For 2016 so far, there have been just five exits in the Benelux region, an even more lacklustre result when compared with new investments. However, in terms of combined value, the picture is very different.

This year has seen a handful of notable exits, including Gimv's sale of Punch Powertrain to Chinese trade buyer Yinyi in a deal worth €1bn. Another stand-out deal was Towerbook's sale of Van Geloven; after investing in the business less than a year ago, the private equity house sold its majority stake in the Dutch frozen food producer to Canadian trade buyer McCain Foods. While the value of this deal remains strictly confidential, we can assume it was somewhere above the €300m level, as Towerbrook used a €150m debt package to finance its acquisition the previous year, and revenues for 2015 came in at €197m.

Also included in this year's exit tracker was 3i's refinancing of Action, which totalled €1.2bn. Furthermore, Gimv scored a further divestment through the sale of VCST to trade buyer BMT Group. The value was undisclosed; however, with turnover of €169m reported in 2015 we can safely assume the sale is at least somewhere in the €200m region.

All together, these exits amount to an estimated total of €2.7bn. But crucially, the quarter is not over yet, and looking at rumoured transactions, there seems to be a very strong likelihood of more exit activity.

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The newswires have been closely following CVC's plans to sell Dutch HR software and services provider Raet, with the GP bringing in Rothschild to run a process. The sale of Raet is likely to be valued at between €376-564m, or 8-12x its 2014 earnings of €47m on revenues of €147.9m. If this is the case, the divestment is unlikely to result in a home run for CVC given the private equity house paid around €400m for Raet in 2011 (sellers Advent and Taros Capital were reported to have been seeking around 8x EBITDA for the business).

Another exit could come in the form of Holland Venture Partners' sale of Opdidakt, which is likely to be acquired by Karmijn Kapital.

If these deals take place before the end of the quarter, or within the next two weeks, then despite the dramatic fall in deal volume for the first three months of the year (potentially rising to just seven), the period could be one of the highest performers in value terms compared with previous quarters.

In Q1 2015, the region's combined exit value was €2.5bn via 19 deals; in Q2 it was €2.6bn through 18 deals; in Q3 it was €3.2bn, and in Q4 exit total hit €4.9bn – although it must be noted that almost half of the Q4 total can be attributed to the sale of Acerta Pharma for €2.4bn.

But even with just seven potential deals for the first three months of 2016, Benelux's combined exit value for Q1 could hit somewhere around the €3.06bn mark; an impressive sum given the scarcity of divestments.

The striking combined total is testament to local GPs' ability to attract trade buyers, which typically have deeper pockets than other private equity bidders. Indeed, of the five divestments seen so far this year, four have been trade sales.