Benelux Q1 activity delivers increase in 'pass-the-parcel' deals

The proportion of secondary buyouts as a percentage of all buyout activity was at a record high in the first three months of the year, with nearly half (46%) of all buyouts being sourced from other GPs, according to unquote" data. This is up significantly from the 34% recorded in 2014, and for once the Benelux region is ahead of several of its neighbours when it comes to the prominence of secondary buyouts: looking at Europe as a whole, SBOs accounted for 39% of all transactions in Q1 volume-wise.

The proportion of secondary dealflow in Benelux was much higher than that seen in Germany, where just 15% of all buyouts were sourced from other GPs in Q1, or the Nordic countries (31% of all buyouts). That said, SBOs were not as prominent in Benelux as they were in Europe's most mature private equity markets, the UK (55%) and France (65%).

Some of the most high-profile deals of recent weeks in the region have been sourced from fellow GPs. This includes PAI Partners acquiring AS Adventure Group, a Belgian retailer of outdoor clothing and equipment, in a secondary management buyout from Lion Capital for €400m in March. Earlier in February, Apax Partners bought 3i's majority stake in Azelis, a Belgian speciality chemicals distributor for an estimated €430m (10.5x adjusted EBITDA).

The first quarter of 2015 may stick out, but the signs of secondary buyout activity picking up in the Benelux region were apparent last year. Such deals accounted for around a third (34%) of all local buyouts recorded in 2014, against slightly less than a quarter (24%) in 2013 – the latter being in line with the 25% average recorded over the 2008-12 period. Should the rest of 2015 stick to the trend initiated in the first quarter, the more optimistic observers could argue a growing buoyant secondary buyout market is simply the by-product of a maturing private equity industry, in a region were dealflow is not exactly abundant to start with.

Others could, however, wonder whether primary buyout opportunities are on a permanent downward slide. Indeed, transactions sourced from private or family vendors have seen their contribution to the overall buyout picture slowly decline in the past couple of years. More than half of all Benelux buyouts were sourced from such vendors in 2013; this figure fell to 48% the following year, before dropping to an alarming 25% in the first three months of 2015 – against 44% when looking at European buyout dealflow as a whole.

Carve-out bonanza
Fortunately, it would seem that not all primary sources of dealflow have dried up in the Benelux region. Much like secondary buyouts, corporate spin-outs have become more prominent from 2013 onwards, increasing from just 13% of all buyouts that year to 18% in 2014 and a healthy 31% in the first quarter of 2015.

Comparing this last percentage with the proportion of carve-outs in European buyout dealflow as a whole (a mere 14.5% in Q1 2015), the Benelux region is still more attractive than many of its neighbours in that regard.

At the lower end of the market, Argos Soditic's recently opened Brussels office scored its maiden deal with the €70m MBO of Belgian rail freight operator SNCB Logistics from parent SNCB. Meanwhile, at the other end of the spectrum, CVC Capital Partners acquired a 65% stake in the polymer intermediates and composite resins division of Royal DSM for €300-350m. The deal gave the asset an enterprise value of €600m, with an additional earn-out option of up to €175m – which would still value the business at a rather reasonable 7x EBITDA.

GPs eager to avoid high-profile ‘recycled' deals and explore uncharted territories will be relieved to note the Benelux region still appears to have much to offer in that regard – even if it increasingly involves dealing with typically complex carve-out scenarios.

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• Topics
• Benelux
• Buyouts
• Benelux
• Secondary buyout
• PAI Partners
• Lion Capital
• CVC Capital Partners
• Argos Wityu
• Apax Partners
• 3i
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• Unq2015May