Private Equity: Ready for Take Off
Private Equity, The Netherlands | Report | Q1 2021
With deal counts restored to pre-COVID-19 levels, we are optimistic for 2021's deal activity and expect private equity to gear up and deploy a vast amount of capital that could not be put to work last year.
The hunt for good assets will continue to be very competitive. To better adapt to this prevailing market environment, PE players are increasingly seeking platform-acquisition strategies, both to add value to their existing portfolio companies and to deploy capital more efficiently, as can be read in this report.
M&A activity in the Netherlands
During the last two quarters of 2020, the market showed promising recovery signs, which has resulted in all-time high deal levels in the Netherlands in the first quarter of 2021.
In the first half of 2020, M&A activity drastically declined, as deal flow decreased by 31% compared to the same period in 2019. Deal flow demonstrated a promising recovery in the second half of 2020, where the number of closed deals was only 4% lower than the second half of 2019. In Q1 2021, a similar recovery path is visible, with the average number of monthly deals reaching 104, compared to 102 in the previous quarter. This marks a 2% increase in the number of closed deals compared to Q4 2020 and is an all-time high level.
In the beginning of the COVID-19 crisis, deal flow in the Netherlands declined faster than the global average as local debt providers held off acquisition financing until the full scale of consequences for business were visible. In Q4 2020, debt providers had a better understanding of the damage and cautiously started to provide debt again. On top of this, Dutch PEs and (foreign) debt funds increasingly found each other. This continued into Q1 2021, where PE deals remained on course as PEs are in need of finding a return on investment for the large pile of dry powder. The slight decrease of PE-involved deals follows from volatile economic prospects that are especially visible in the Netherlands, due to the somewhat unclear progress and future of COVID-19 vaccination programs.
When looking at the deal size categories, most notable in Q1 2021 are the shares of deals larger than EUR 5m: increasing from 80% to 86%, a pre-crisis level.
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