Valuations remain high and new investments likely to be lower than in 2018. The market trend is still regarded as 'seller-friendly' for the time being. Political and economic uncertainty both are likely to affect future M&A transactions. Therefore valuation was the threat that linked all topics that were discussed during the third edition of the Benelux Private Equity Breakfast on 16 May. The event was organised by CMS and Pedersen & Partners.
The event, in the form of a panel discussion, started after a well-served breakfast. The panel consisted of leading speakers from several disciplines within the private equity industry: Brigitte van der Maarel (Head of Mezzanine & Equity Partners at NIBC Bank), Mark Bakker (Director Benelux Private Equity at 3i), Dick Boer (Head of European Real Estate, Diversified Industries & Services at Kempen & Co), Jeroen Lenssen (Vice President at Riverside Europe), Franck de Lange (Head of Leveraged Finance Europe at ABN AMRO) and Pieter van Duijvenvoorde (Corporate/M&A Partner at CMS).
The discussion led by Mark Ziekman (Partner Corporate/M&A at CMS) and Poul Pedersen (Managing Partner at Pedersen & Partners) started after welcoming almost 100 attendees.
Trends and developments
Through various questions, the latest trends and developments in the private equity market in the Benelux were discussed. Previous years were good years for the private equity sector in which some major deals have been closed, both globally and in the Benelux. However, at the end of 2018 a slowdown was observed, which also continues in the first half of 2019. This may mean that the profit forecast has to be lowered a little. Nevertheless, the panel agreed that there are still some good opportunities, for example in (fin)tech and life sciences.
Because valuations are relatively high, Jeroen Lenssen emphasized the need to plan in advance, maybe even before the transaction, what you intend to do with the newly acquired company in order to achieve the desired returns. The expectation of the panel is that these prices may decrease slightly, but will remain high.
Also important trends from a legal perspective were mentioned. Pieter van Duijvenvoorde shed his light on the increase in the use of Warranty & Indemnity (W&I) insurance. This insurance provides cover against damages caused by violation of a certain guarantee or indemnity in a takeover contract. According to Dick Boer this ensures that negotiations run more smoothly, as this potential claim for the selling party can largely be covered. On the other hand, the use of Material Adverse Change (MAC) clauses has not changed significantly over the last years.
Furthermore, the impact of the geopolitical turmoil, interesting outbound investment destinations and the fund raising environment were discussed.
According to the panel, the challenges for the coming years lie alongside the Brexit, in a potentially declining economy and the need for human capital quality. In addition, the demand for sustainability and technological developments were mentioned as a challenge, but were also seen as an opportunity.
The event was concluded with a Q&A session, followed by an extensive discussion with the attendees. We look back on another successful edition of the Benelux Private Equity Breakfast.
Would you like to know more about the latest developments in M&A? Read our CMS European M&A study 2019.