Brookz Takeover Barometer H2-2019: Number of SME businesses sold up sharply

In the second half of 2019, the number of sales transactions in the SME takeover market increased by 35%. The price level remained unchanged, with the average price paid for an SME business being 4.95 times gross profit.

These are the main findings of the Takeover Barometer, the periodic research of takeover platforms Brookz and Dealsuite on figures and trends in the Dutch takeover market. The survey was conducted among 262 Dutch merger & acquisition advisory firms focusing on businesses with revenues between 0.5 and 30 million euros.

More smaller deals

Contrary to reports of a perhaps cooling takeover market, the number of buy and sell transactions in Dutch SMEs increased sharply in the second half of 2019 compared to the first 6 months. The number of businesses sold increased by 35%. Adjusted for the seasonal effect - more transactions always take place in the second half of the year - this is still a substantial increase.

It is also notable that compared to two years ago (H2-2017), the number of smaller transactions (deal value up to €5 million) increased sharply. The price level also remained unchanged in the second half of 2019: on average, 4.95 times the gross profit was paid for an SME business.

Good reflection of the market

According to Floyd Plettenberg, partner at Brookz and Dealsuite, the results of the Takeover Barometer accurately reflect the current market situation. Plettenberg: "The number of businesses sold has been steadily increasing for four years in a row. Relatively speaking, both the number of businesses sold in the segment with a deal value below and above 5 million euros increased. But in absolute terms, the number of transactions in the segment with a deal value below EUR 5 million has increased particularly strongly. So more small businesses in particular are being sold.'

Advisers as deal breakers

In addition, this version of the Takeover Barometer asked what are the most common reasons why a sale transaction does not go through. The two most important reasons cited were 'too low an offer' (27%) and 'lack of trust between buyer and seller' (17%). It is striking that in more than a quarter of the abandoned transactions, the adviser is mentioned as the deal breaker. For example, because an adviser has created too high expectations about the price, lacks expertise, or is unable to reach an agreement with the buying party's adviser.

Outlook

The outlook for the first half of 2020 is still good, but slightly less positive than six months ago: over 81% of acquisition advisory firms (was 84%) expect the SME acquisition market to remain stable or continue to pick up over the next 6 months. A minority of 19% expect the market to deteriorate. Expressed as a report grade, acquisition advisory firms give a 7.5 for the expected acquisition climate in the first half of 2020, compared to a 7.7 for the second half of last year.