Brookz Takeover Barometer H2-2024: Recovery in takeover market continues

The Dutch takeover market has continued to recover over the past six months. In the second half of 2024, the number of sales transactions increased by 4% and the average sales price of an SME business rose to 4.9 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 288 Dutch merger & acquisition advisory firms focusing on businesses with revenues between 0.5 and 50 million euros.

Higher risk premium

After the upward trend already started in the first half of 2024, the number of transactions increased again in the second half of last year. Despite international tensions and political uncertainty, on balance 4% more businesses were sold last half year.

Realized transaction prices of businesses also showed a slight increase last 6 months. On average, an SME business paid 4.9 times its gross annual profit in H2-2024, up from 4.8 times in the first half of 2024.

What stands out is an increase in the difference between large and small SME businesses. It is known that due to the higher risk premium - applicable to smaller companies - the paid EBITDA multiples for larger businesses are on average higher than the paid EBITDA multiples for smaller businesses.For a business with a gross annual profit of 200,000 euros, in the second half of 2024, the average paid was 3.7 times the gross annual profit. For a business with gross annual profits of 5 million euros, an average of 6 times gross annual profits was paid. Thus, in the past 6 months, the difference in the valuation of large and small businesses has widened by more than 20%.

Dealbreakers

Although more businesses were sold in the second half of 2024 than in the previous six months, sales deals were also terminated early. Not every sales assignment results in a successful deal. In the past six months, one in five sales projects started was temporarily halted or even cancelled permanently.

The most important deal breakers were mentioned as unrealistic price expectations of the seller (42%), changing market conditions during the transaction process (29%) and problems in obtaining necessary financing (26%).

According to Floyd Plettenberg, CEO of Dealsuite, an unrealistic price expectation among sellers in particular is a recognizable deal breaker. "We see in practice that people try to solve this issue with a partially deferred payment that depends on future results. But that often leads to discussions afterwards and possibly even a fight in court. A serious risk that is insufficiently recognized by many entrepreneurs.'

Outlook

In line with the growing takeover market, the pipeline at advisory firms is also well filled and the outlook for the second half of 2024 is predominantly positive. At more than four in ten advisory firms, the number of assignments in their portfolio has increased by at least 10%. In addition, the vast majority of advisers surveyed (79%) are optimistic about the outlook for the next 6 months, with a 7.2 rating for H1-2025.