Private Equity: Navigating Forward

Private Equity, The Netherlands | Report | Q1 2024

Q1 2024 showed a slow start of M&A activity, but recovery is expected.

M&A activity in the Netherlands

M&A activity in the Netherlands experienced a slow beginning of 2024 after a strong Q4 2023. After experiencing an increase in the market in Q4 2023, deal volume declined significantly by ca. 24% in Q1 2024. This trend was expected based on limited sale processes in the market in H2 2023, which can be attributed to ongoing market uncertainties following the unrest in the Middle East.

When examining overall decline in deal volume, PE-involved transactions decreased by 49%, while strategic deals only saw a 15% decrease. No surprise, as PE transactions are typically more affected by rising interest rates and geopolitical turmoil. With 38 transactions, Q1 2024 marked the lowest quarterly PE-involved deal count in the past three years, primary as a result of fewer PE-exits in Q1 2024.

When examining deals by size, it’s evident that the proportion of mid-market deals ranging from €50 - €100m and €100 - €250m has remained relatively stable in Q1 2024. This is in line with what we observe in practice with strong deal flow in the lower end of the mid-market, which is often less impacted by volatile interest rates as a consequence of market unpredictability.

Valuation multiples have remained relatively stable at 8.7x, indicating the consistency of European EV/EBITDA multiples. Over the past year, buyers and sellers have narrowed valuation gaps, incorporating the current status quo into their valuations.

European leveraged finance market

European leveraged loan volume surged to EUR 29.3bn in Q1 2024, marking the busiest quarter since Q2 2021, mostly driven by refinancing deals. While there were concerns about the lack of new M&A activity, refinancing deals kept the loan market busy. Of the total volume, EUR 18.8bn was allocated to refinance existing deals, the highest since Q1 2017.

Direct lender activity in Europe has increase significantly over the past decade. Especially in recent years, when bank loans were relatively expensive, private debt was a viable alternative.

For the remainder of 2024, we anticipate a more positive outlook in M&A activity based on the expected PE exit pressure in combination with an increasing number of companies that are currently in the market or processes that are in the preparation phase today. On top of that, Oaklins notices an increased pitching activity, particularly for PE exits. However, if we translate these observations into expectations of the timing of closing or signing transactions, we must consider the duration of a process. As a result, we expect Q2 to remain slow in terms of actual deal announcements and that the increased M&A activity will mainly become visible in Q4 of this year. 2024 has all the ingredients to become a busy and successful year for us. TIJN BASTIAANS, PRIVATE EQUITY COVERAGE

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