Private Equity: Green Light for a Record Year

Private Equity, The Netherlands | Report | Q3 2021

M&A activity in the Netherlands in Q3 was a continuation of a very strong first half year. Nonetheless, Q3 was different, with many transactions in the Netherlands in the €50m – €100m size category, relatively few in the €100m - €500m segment and a sharp increase in €500m+ deals, as can be read in this report.

The M&A outlook is good, as strong financial company performances and high valuations are a perfect recipe for company owners to exit, while buyers are eager to deploy capital. We expect the Dutch M&A market to reach more than 1,200 transactions this year.

This edition highlights an important trend we see in the investment landscape: the increased focus on environmental and social governance (ESG). At the moment, ESG factors are progressively being ingrained in the way PE firms evaluate prospects and targets, manage their existing portfolio and contemplate an exit. The knife cuts both ways, the portfolio company’s ESG credentials are an excellent reference for conscious fund investors and an important factor for supporting premium exits.

M&A activity in the Netherlands

In Q3 2021, strong M&A activity in the Netherlands lost no momentum and is on track to set a record-breaking 2021. Fueled by the pandemic recovery, M&A activity remained at remarkable levels of 300+ deals in Q3 2021. July 2021 reported a monthly deal count of 147 deals, the highest since 2018. A strong recovery in M&A appetite from strategics in combination with cheap financing available for PEs drives dealmaking in the Netherlands and no sign of a potential slowdown is present.

We expect the trend of strong M&A activity to continue in Q4 2021, on the back of several important drivers. Firstly, pipelines are packed with on hold projects and secondly, dealmaking has a trend of closing deals before the Christmas break. With year-to-date deal volume already higher than full-year 2020, M&A activity in the Netherlands is on track for a record-breaking 2021.

When looking at the deal size categories, comparing Q3 2021 to Q2 2021 shows an interesting change. Significant more deals are done in the €50m to €100m segment. The increase in mid-market deals shows an increase of 28% in comparison to the average of the past 12 months. In contrast, deals in the €100m to €250m segment declined sharply in Q3, apart from a substantial increase in €500m+ deals.

The distribution of deals in the Netherlands by sector has changed slightly over the last twelve months. The relative share of business services and industrials has increased, at the expense of the TMT sector. Overall, the TMT sector remains the most active sector, something Oaklins’ TMT sector team can relate to having closed 8 deals YTD and expecting to enter the double digits before the end of the year.

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