Brookz Takeover Barometer H2-2021: Dutch businesses cheap

Compared to our neighboring countries, Dutch SME businesses are relatively cheap. For comparable businesses, between 11 and 20% more is paid in Germany, France and the UK. For businesses in the Health & Pharmaceuticals sector, the difference in revenue can even reach 35 percent.

This is the main outcome of the Takeover Barometer, the periodic research of takeover platforms Brookz and Dealsuite on figures and trends in the Dutch takeover market. The survey took place among 272 Dutch merger & acquisition advisory firms focusing on businesses with revenues between 0.5 and 30 million euros.

Dutch businesses relatively cheap

Last months, for the first time the Takeover Barometer was conducted with the same set-up in the DACH region (Germany, Austria, Switzerland), France and the combination region United Kingdom & Ireland. As a result, average takeover prices paid in the Netherlands can now also be compared with our neighboring countries.

What is striking is that across all sectors for comparable businesses, the average acquisition prices paid are higher than in the Netherlands. In the DACH region on average 20% more is paid , in UK & Ireland 12% and in France 11%. The biggest difference in the average paid EBITDA multiple was recorded in the Health & Pharmaceuticals sector. In this sector, the difference in sales price between the Netherlands and the UK & Ireland is as much as 35%.

Foreign interest

According to Floyd Plettenberg, partner at Brookz and Dealsuite, these price differences are part of the reason why more and more foreign investors and strategic parties are entering the Dutch market. 'From the perspective of foreign buyers, Dutch businesses are relatively cheap. That makes Dutch businesses extra attractive to them. But it is also interesting for Dutch sellers. Because in a negotiation, those foreign buyers also have more room to offer above the regular Dutch valuation. For Dutch sellers, it is therefore advisable to also be open to foreign interest.'

Growth in takeover market flattens out

After strong growth in the number of purchase transactions (36%) and sales transactions (21%) in the first six months of 2021, the second half of 2021 showed flattening growth. The number of sales transactions in H2-2021 increased by 4% and the number of purchase transactions by 2%.

At the sector level, there was especially strong growth in the number of transactions in the Healthcare & Pharmaceuticals sector (5%) and the number of transactions in the Hospitality, Tourism & Recreation sector is still half the Pre-Covid level.

Across all sectors, it was striking that the share of sales transactions of large SMEs (deal value > 5 mio) increased significantly (+10%) at the expense of smaller SMEs (deal value > 2.5 mio). The share of transactions of the latter group showed a decrease of 8% in H2- 2021 compared to H1-2021.

Recovery of takeover prices in Hospitality and Retail

On average 4.85 times the gross profit was paid for an SME business in the second half of 2021, the same as in the first half of 2021. In most sectors, the Ebitda multiple paid remained almost stable, with the exception of the Retail Trade and Hospitality, Tourism & Recreation sectors. These two sectors saw a recovery in paid acquisition prices for the first time after two years of decline. The Ebitda multiple in the Hospitality, Tourism & Recreation sector rose from 3.2 to 3.4 (+6.3%) and the Ebitda multiple in the Retail sector rose from 2.95 to 3.1 (+5.1%).

Outlook

The outlook for takeover market in the first half of 2022 is downright positive. A majority of all advisers (39%) think the takeover market will continue to pick up or at least remain stable (58%) over the next 6 months. Only 3% of all advisers think the market will deteriorate in the next 6 months. Advisers rate the market for the next 6 months at 8.0, up from 7.8 six months ago.