Private Equity: Finding New Balance

Private Equity, The Netherlands | Report | Q2 2023

Mid-market deals leading the way in a dynamic and more challenging dealmaking environment.

Despite prevailing headwinds, the Dutch M&A market showed a strong first half year in 2023 in terms of dealmaking, especially in PE involvement, as can be read in our report.

M&A activity in the Netherlands

PE-related deal flow represented 27% of all M&A activity in the Netherlands in Q2 2023. In Q2 2023 Dutch private equity firms have demonstrated a strong appetite for deals, with 74 transactions recorded, up from 60 in Q1 2023. Interestingly, PE exits more than doubled from 8 to 18 exits in Q2 2023 compared to the previous quarter, representing the most active exit period over the last three years.

When analyzing M&A activity per deal size, Q4 2023 shows a complete standstill in +€500m deals. On the other hand, mid-market deals in the €100m-€250m range have a more prominent share in the M&A landscape in Q2 2023 growing its share to 7.2% from 2.5% in Q1 2023.

European leveraged finance market

In the debt financing landscape, the first half of 2023 has witnessed very low levels of new loan issuance. The decline is attributed to concerns over a looming recession and expectations of continuous central bank interest rate increases. Meanwhile, there has been a noticeable increase in loan extensions across Europe, providing relief from approaching maturities and presenting attractive assets for portfolio managers.

Lenders' cautious approach and higher interest rates have played a role in limiting the amount of debt that is issued. This decrease in debt levels has contributed significantly to the overall decrease in average EBITDA multiples paid. On a positive note, we observed a remarkable increase in equity contribution. This indicates that there is still strong interest in conducting deals, and buyers are increasingly willing to invest more of their own capital in these transactions.

Additionally, we presented our view on leading private equity firms that decided not to hedge their debt positions. This has resulted in massive challenges, as increased interest rates are impacting their outstanding loans.

Although the first half of this year has been challenging for many dealmakers, Oaklins was able to close 26 deals in H1 2023. As we move into the second half of the year, we expect an anticipated increase in deal flow, with sellers concentrating on pre-sale preparation during the summer months. In the coming months, mid-market transactions are expected to dominate the market as buyers seek a balance between strategic acquisitions and securing the necessary financing in an ever-changing market environment. MARTIJN DE WIN, ASSOCIATE DIRECTOR

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