Published: February 13, 2023
As a result of unstable economic conditions, the growth of the Dutch takeover market has stalled. In the second half of 2022, the number of sales transactions fell by 6% and the average sales price by 3.1%.
This is one of the results 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 274 Dutch merger & acquisition advisory firms focusing on businesses with revenues between 0.5 and 30 million euros.
In particular, rising interest rates and high inflation have led to a slight decline in the acquisition market for SME businesses over the past six months. The number of sales transactions fell 6%, with fewer large businesses sold in particular. The share of businesses sold with a deal value 7.5 - 10 mln euros fell by 29%, the share of businesses with a deal value >10 mln euros even by 45%.
In addition, the average paid EBITDA multiple of an SME business fell from 4.85 to 4.70 times gross profit. Above all, according to those surveyed, rising interest rates have a negative impact on the availability of financing (87%), the number of available buyers (67%) and thus on the selling price of companies (77%).
The tilt of the takeover market has also worsened the negotiating position of sellers over the past 6 months. This is reflected in deal terms, the terms that are an important part of a transaction in addition to price. In particular, it appears that the use of an earn-out (conditional payment of part of the sales price ) and a vendor loan (a subordinated loan from the seller) has increased by over 50%.
According to Peter Rikhof, managing director of Brookz, it is inevitable that selling entrepreneurs will have to adjust their price expectations downward in the coming period and water down a bit. 'We see this as a healthy correction of a market that has been very much in favor of selling entrepreneurs over the past two years. The pendulum is swinging the other way for a while now, that's the new reality.'
Despite the slight decline in the takeover market, the pipeline at advisory firms is still well filled and the outlook for the first half of 2023 is moderately positive. Almost 80% of advisers surveyed indicated that the number of assignments in their portfolios remained the same or even increased, only 12% of advisers saw a decrease.
In addition, a majority of the advisers surveyed (59%) think the takeover market will remain stable or even pick up and give the next 6 months a 6.8 rating.
| Sector | Multiple H2-2022 | Adjustment compared to H1-2022 |
|---|---|---|
| Software development | 6,7 | +0,1 |
| IT Services | 6,5 | −0,1 |
| Healthcare & Pharmacy | 6,15 | −0,2 |
| Agri & Food | 5,5 | −0,1 |
| Wholesale | 5,4 | −0,15 |
| E-commerce & Online Stores | 5,3 | −0,3 |
| Industry & Manufacturing | 5,0 | −0,3 |
| Business services | 4,9 | −0,1 |
| Media, Advertising & Communications | 4,2 | −0,2 |
| Construction & Installation Engineering | 3,9 | −0,1 |
| Automotive, Transportation & Logistics | 3,7 | +0,1 |
| Hospitality, Tourism & Recreation | 2,9 | −0,4 |
| Retail | 2,8 | −0,2 |
| Average | 4,7 | −0,15 |
Survey date: end of H2-2022. Adjustment is relative to the multiple from the H1-2022 Barometer (after recalculation for the sector split between IT services and software development). Average as stated in the report. Source: Brookz Takeover Barometer H2-2022 (Issue 17).
Summary
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