Dutch market falls flat

Private equity in the Netherlands slowed down noticeably in 2012 – and while there’s been no sign of a rebound so far this year, there is some cautious optimism about the second half

As the Dutch recently came together to honour their abdicating queen Beatrix and welcome their first king in 123 years, an orange wave of enthusiasm swept through the Netherlands. But for the country’s private equity industry, things have been rather less cheerful recently.

Buyout activity dropped substantially in 2012, according to a recent report from NVP, the Dutch industry body. Deals totalled €1.3 billion, down from €2.1 billion in 2011. And exit volume halved: Dutch GPs generated €841 million in proceeds from the sale of 187 companies in 2012, compared to €1.6 billion from 128 companies in 2011. The market has been quiet, particularly at the larger end, according to the NVP. “Last year there were only three investments which had an equity component of €50 million or more,” says Tjarda Molenaar, head of NVP. 

Bas Glas, a partner at Gilde Equity Management, says the figures aren’t surprising. “Consumer confidence is low, government spending is down, there’s no movement in the housing market … Export is the only pillar of the Dutch economy that is working relatively well, although even that has been affected by slower growth in other countries. Negotiations are lengthier, banks need more time, due diligence is more thorough, the processes take a long longer.”

A scarcity of senior debt hasn’t helped – and ABN AMRO’s first quarterly results were hardly encouraging on that score. Reporting a 17 percent fall in Q1 profits, chairman Gerrit Zalm said the bank “remains cautious for the remainder of the year as unemployment is still on the rise and no economic growth is expected in the Netherlands for 2013.”

“We can [see] banks have retreated slightly,” says Gert Jan van der Hoeven, managing partner at H2 Equity Partners. “It’s harder to finance deals. But sellers have to deal with the same problem, so they are more likely to hold back on the sale to wait for better times. Due to the [lack of] appetite of the banks, there’s less potential for leveraged buyouts.”

Capital raised by Dutch GPs fell last year (to €1.3 billion, down from €2.3 billion in 2011). But there’s plenty of dry powder available, according to the NVP: Egeria, Waterland, Gilde Equity Management, Bencis and H2 Equity Partners all raised capital in recent years. “In the last years it has been a bit quieter,” says Van der Hoeven. “But fundamentally it’s still a good market with good returns.”

This is perhaps why EQT has appointed Kristiaan Nieuwenburg in the Benelux recently to establish “a significant local presence in the region”. As Glas says: “GPs don’t enter a market in the spur of a moment; it would always be a long term decision.”

What’s more, both Glas and Molenaar expect activity to pick up in the second half of the year. “There are larger deals in the pipeline,” the latter insists.

And as Egeria partner Caroline Huyskes points out, recessions can actually create opportunities. “We have a tile manufacturer in our portfolio that is currently not having an easy time – but they are expanding abroad and are taking up a lot of market share by buying up competitors for relatively low multiples. Never waste a good recession.” 

It’s a sentiment that suggests the recent royal celebrations may have inspired the Dutch buyout market with some optimism after all.