Brookz Takeover Barometer H2-2020: Strong recovery in takeover market

In the second half of 2020, the Dutch takeover market recovered strongly from the corona dip in the spring. The number of sales transactions increased by 15 percent. On average, 4.85 times gross profit was paid for these businesses.

These are the main findings of the Takeover Barometer, the periodic research by takeover platforms Brookz and Dealsuite on figures and trends in the Dutch takeover market. The survey was conducted among 265 Dutch merger & acquisition advisory firms focusing on businesses with revenues between 0.5 and 30 million euros.

Sector differences

Although the number of businesses sold increased by an average of 15 percent in the second half of 2020, there are major differences between sectors. In particular, more businesses were sold in the E-commerce, Healthcare & Pharmaceuticals, and Manufacturing sectors. In addition, more larger businesses in particular were sold in the past 6 months: the share of transactions with a deal value above €5 million rose from 24% to 29%. In contrast, the share of sales transactions of smaller businesses (deal value < €2.5 million) fell sharply from 64% to 49%.

Higher prices

On average, an SME business was paid 4.85 times gross profit in the second half of 2020, 3% more than in the first half of the year. But again, the differences by sector are large. Average Ebitda multiples for businesses in the IT Services & Software Development (6.5), Healthcare & Pharmaceuticals (6.25) and Ecommerce (5.55) sectors went up again. For businesses in the Hospitality, Tourism & Recreation and Retail sectors, average prices paid were more than 6.5% lower than in the first half of 2020.

K-shaped recovery

According to Floyd Plettenberg, partner at Brookz and Dealsuite, the Dutch SME acquisition market is now almost back to pre-corona levels. But there is a K-shaped recovery. Plettenberg: 'We see a recovery with 2 faces: on the one hand sectors like IT software, E-commerce and Healthcare & Pharmaceuticals doing clearly better than average. On the other hand businesses in Hospitality, Tourism & Recreation and Retail that are structurally lagging behind. An additional problem for these laggards is that banks are currently very reluctant to finance acquisitions in these sectors.'

Outlook

The outlook for the first half of 2021 is mostly positive. Half of all advisers think the acquisition market will remain stable over the next 6 months; four in 10 advisers think the market will even continue to pick up. The only concern is the availability of bank financing. Two-thirds of all advisers say that since the Covid blowout it has become a lot harder to get the bank to go along with an acquisition financing. An overwhelming majority of advisers do not expect banks to relax their financing terms in the next 6 months.