There is capital enough in the market, yet investment companies are cautiously applying the brakes. A conversation with four investors about the current investment climate. '2024 is all about increased dike monitoring.'
Lots of investment companies, lots of money and lots of entrepreneurs with growth plans. Yet the tipping point seems to have been reached. Private equity parties are slowly plunging into (better) managing their holdings than making investments due to the uncertain times in the world. The economic headwinds are also compounded by rising interest rates, falling business sales prices and increasingly difficult (re-)financing.
Joining us at the table are Michiel GeurtsTransEquity Network), Cilian Jansen Verplanke(Karmijn Kapitaal), Mark van Rijn(Bolster Investment Partners) and Albert KoopsAVerest Capital), all four partners in private equity firms that focus on SMEs with investments between 0.5 and 50 million euros. But that's also where the comparison ends a bit.
The year is almost over. How do you look back on 2023?
Geurts: "Corona still had an impact. Some industries benefited, other industries were affected. And combined with the current developments of war, rising interest rates and inflation records, that makes our profession a bit more challenging today. In particular, to arrive at an informed value of a business. After all, just what is the sustainable EBITDA you value a business on? Actually not last year. Nor the two corona years. But should you then refer back to the pre-coronagraph 2019? That's almost five years behind us already.'
Van Rijn: "That is indeed incredibly difficult. What we ourselves are more concerned with than a few years ago is the long-term trend. We look even further into the past to chart the development of a company. And we put even more energy than before into our own assessment of the future. Because the past three years are so unpredictable.'
Koops: "You want to have a piece of that company's past, to get a sense of what was performed then. But the past three years say very little indeed. So we try as best we can to look to the future on a case-by-case basis. We take the entrepreneur very much into that, what is his vision of it? A lot of energy goes into that at the moment.'
Jansen Verplanke: "We see a lot of businesses for sale right now. And it seems like corona has been a moment of reflection for many entrepreneurs, asking: do I want to continue like this? And that is still seeping through now. In doing so, it strikes me that with many businesses for sale, the entrepreneur often wants to get out completely. And then you are talking about a different valuation than when an entrepreneur stays on to continue to grow together with an investor.'
