Despite all the turmoil in the world, the acquisition market is steaming along seemingly unabated. A roundtable discussion on the impact of uncertainty, the importance of a periodic business valuation and paying sixteen times EBITDA. 'How are you ever going to recoup that?'
With Frank van EeAlfa Consultants), Krijn de GraafKreston LDJ Corporate Finance) and Robert de VriesCentrum voor Bedrijfsopvolging), three experienced acquisition advisors join the table. All have been active in the merger and acquisition market for more than 15 years and have experienced the necessary ups and downs. The question soon arises of how much impact negative events - a banking crisis, credit crunch, corona, various wars, rocketing inflation, rising interest rates - have really had on the economy and the takeover market. The generally shared opinion is that so far, in hindsight, it has always been not that bad.
De Graaf: "With the theory from school in the back of my mind, I personally expected these events to have had much more impact on the acquisition market. But each time that didn't happen, and the market rebounded quickly.' De Vries adds, 'We have now built a mechanism in the European Union to keep the economy going - whatever happens - at all times.' Van Ee: 'By using rigorous stimulus measures to keep everything afloat each time, you also impede a natural process of remediation. You might wonder if that is all that healthy in the end. I think it's actually good if the tree is shaken vigorously once in a while.'
According to CBS, the number of mergers and acquisitions in 2023 was at its lowest level since 2017 and a small plus was predicted for 2024. How have you experienced the past year?
De Vries: 'For me, 2023 was actually a very good year. In the first months of 2024 there was a little less activity in the takeover market, it slowed down a bit. But in the second half of this year the new orders are flowing in again. I see that buyers are also a little less cautious. That greatly facilitates the continuation of transactions. I focus mainly on businesses in the manufacturing industry, ICT, communications and business services, and that's where sales orders are really picking up.
Van Ee: "The economic uncertainty did put some more pressure on prices, and in some cases that uncertainty makes financing transactions more difficult. Nevertheless, that does not hinder deal flow at all, because in general there are still enough orders in the market. For us, 2024 is simply a good year. With Alfa, we realize about thirty purchase and sale transactions per year and also about 200 other assignments such as due diligence studies and business valuations.'
De Graaf: 'We do about fifteen transactions a year. But in addition, we also do a lot of valuations. And that is an interesting world at the moment, because where is the value? What is the markdown for a minority stake? And is a forty percent interest proportional to the value of a one hundred percent interest? All questions to which the answers are not very clear.'
Van Ee: "You can make very complicated calculations, but ultimately it's all about payback. If you buy a business, how many years will it take you to earn it back? I notice in practice that most entrepreneurs have a reasonable sense of that.'
You read an excerpt from the roundtable interview with three acquisition advisors and can be read in its entirety in the Brookz 500. Curious about what opportunities and threats entrepreneurs face in the acquisition market in 2025? Then you can order the 2025 edition at the click of a button.
