Growth to remain strong in 2010

Activity in the Belgian private equity market, like its Western European peers, has changed dramatically since the hey-day of 2007. Back then the market was at its peak driven by the oft-cited boom in buyouts, registering 18 deals totalling EUR 3.4bn over the course of the year. In comparison growth capital saw a meagre EUR 778m invested in seven deals, while just nine early-stage transactions totalled EUR 71m.
Flash forward to 2009 and the picture is altogether different. Following the wider European trend the buyout market in Belgium has shrunk considerably, with only three deals recorded over the whole of 2009.
Underwriting and syndication have all but disappeared and dealmakers now rely on complicated club structures to raise the necessary financing to get transactions away. And the cautiousness of the banking sector restricts options further: lenders are prepared to hold only modest sums to their balance sheets, meaning it is difficult to transact above the EUR 200-300m level.

Add to this the fact that price expectations between buyers and sellers remain some way apart, as economic uncertainty continues to linger in the industry’s collective consciousness.

However, while this plummet in the number of buyouts dragged down the overall value of the Belgian private equity market, activity across the board remained broadly in line with 2007. “Although the level of buyouts has significantly decreased, we witnessed a very strong 2009, driven mostly by growth capital, replacement capital and some special situation investments,” asserts Peter Maenhout, executive vice-president at regional investor Gimv.

Figures from unquote” substantiate this view, showing a nominal decrease in transaction numbers between 2007 and 2009 from 34 to 30. During this period the growth capital space has seen activity double to 15 deals worth EUR 680m.

So what does the future hold for 2010? Larger markets have begun to see a revival of fortunes for the buyout market, ironically driven in part by the boom-time darling, secondary buyouts. While it is far too early to proclaim this an SBO renaissance, there are already a slew of private equity-backed businesses that had been publicly seeking an IPO, but are now running a dual track process and finding cash-rich rival investors queuing up to put in bids.

The problems with raising debt and agreeing fair value, though, have not gone away entirely: most commentators predict that the buyout uptick will be slow and steady rather than a surge. However, with businesses in need of capital to emerge from the defensive positions adopted during the last two years, growth capital could be well positioned to continue to drive activity in 2010. Comments Maenhout: “[Our] outlook for 2010 is similar to that of 2009, which is optimistic. We will, though, certainly need a high degree of creativity, open-mindedness and engineering – of deal structuring sort not financial.” 

The European Buyout Review 2010 is out soon, for more information please visit www.unquote.com/research

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• Topics
• Expansion
• Deals
• Buyouts
• Benelux
• Belgium
• Gimv