In recent years, foreign private equity parties have increasingly used the Netherlands as a starting point for a buy-and-build strategy: first acquiring a strong "platform" and then rapidly growing it through additional acquisitions.
For SME entrepreneurs who want to sell, this is a boost. Because if there are more candidates, this can have a price-driving effect. However, ultimate success depends heavily on proper integration and clear agreements.
Buy-and-build in brief
Buy-and-build is all about (non-organic) growth: a platform company takes over (usually) smaller companies and integrates them step by step. The value comes not only from revenue growth (e.g., through cross-selling), but also from cost savings through synergies and from a possible "multiple uplift.
This higher valuation multiple may arise because a larger and more professional entity is more attractive to a subsequent buyer. Acquisitions for the platform can take place within the same sector or just adjacent, through additional services or products that strengthen the business.
Why the Netherlands?
The Netherlands is an attractive investment climate for foreign investors because of a combination of market and location advantages. The Netherlands has a relatively stable economy, which helps build long-term platforms, while its strong technology and innovation sector provides additional growth opportunities. In addition, the Netherlands' strategic location makes it a logical base for further European expansion.
But, of course, so can the price for Dutch businesses. This is often lower than in our neighboring countries. Foreign private equity parties focus mainly on sectors with structural growth and stable cash flows, such as IT, software and technology (especially SaaS), accountancy, installation sector, healthcare and energy transition. Many of the foreign PE parties active in the Netherlands come from Scandinavia, Belgium, Germany and the United Kingdom.
What does this mean for the (SME) seller?
For entrepreneurs considering a sale, a foreign private equity party can have a positive impact on both the sales process and the deal structure. Additional interest from abroad often creates a more competitive bidding process, increasing the likelihood of an attractive price and terms.
What does change in this type of transaction is the deal set-up: more often the selling shareholders are asked to reinvest. The entrepreneur receives a large portion in cash for selling his shares, but also reinvests a portion of the proceeds in the new platform. Percentages in terms of reinvestment are usually between 15% and 30% of the purchase price. This also allows the seller to participate in any subsequent value step, for example in the event of a sale of the entire platform over time. (Foreign) private equity parties see such reinvestment as a form of risk reduction. This is because it aligns interests, increases commitment and is seen as a signal of confidence in the (own) company.
In short, an investment from a foreign private equity party can increase the sales proceeds, as long as the integration is realistic and the arrangements around reinvestment, control and sale in time are clearly established in advance.
