The recovery of the Dutch takeover market has continued over the past six months. In the second half of 2023, the number of sales transactions increased by 5% and the average sale price of an SME business rose to 4.75 times gross profit.
This is one of the results of the Takeover Barometer, the periodical research of the takeover platforms Brookz and Dealsuite on figures and trends in the Dutch takeover market. The survey was conducted among 276 Dutch merger & acquisition advisory firms focusing on businesses with revenues between 0.5 and 30 million euros.
Return of confidence
With interest rates now leveling off and inflation seemingly under control, confidence among entrepreneurs and investors has also returned. Compared to H1-2023, the number of sales transactions increased 5% over the past six months.
It was noticeable that in particular more businesses with a larger deal value were sold (deal value <5 mln euro). In contrast, the share of transactions by businesses with a deal value of <2.5 million euros fell from 63% to 43%. Average sales prices increased slightly over the past six months: on average, 4.75 times the gross profit was paid for an SME business, up 2%.
Vendor loan
Despite increased confidence from entrepreneurs and investors, banks are still cautious about financing. As a result, the vendor loan component in particular has become increasingly important in securing acquisition financing. Compared to four years ago, the share of the vendor loan has now risen from 75% to 83%.
According to Floyd Plettenberg, CEO of Dealsuite, there are several reasons for this. 'First of all, a vendor loan sends a signal of confidence in the new owner to the bank. This in turn makes the bank want to finance more and the deal can go through. In addition, a subordinated loan at say 8% interest currently yields three times as much as putting the money in a savings account. This way the knife cuts both ways; a classic win/win situation.
Outlook
In line with the recovered takeover market, the pipeline at advisory firms is also well filled and the outlook for the first half of 2024 is predominantly positive. At more than four in 10 advisory firms, the number of assignments in their portfolio has increased by at least 10%. In addition, a majority of advisers surveyed (72%) are optimistic about the outlook for the next 6 months with a 7.3 rating.
