Swiss company Zehnder expands footprint in the Netherlands

19 March 2019

Swiss company Zehnder has acquired Netherlands-based Recair, a producer of energy-efficient heat exchangers. The deal was advised on by M&A consultants from three firms: Baker Tilly, Dommerholt Advocaten and De Jong & Laan.

Zehnder Group is one of Europe's larger producers of radiators, cooling systems and ventilation systems for interior spaces. The company serves both the consumer segment – such as apartments and houses – as well as the business segments – including hospitals, offices, schools, sports halls and warehouses. 

The Swiss company entered the Dutch market in 2002 when it acquired StorkAir. Now, seventeen years down the line, Zehnder has closed its second acquisition in the Benelux country. With the addition, the manufacturer expands its market share in heat exchangers for the residential market. Recair develops, produces and sells energy-efficient heat exchangers that have been developed primarily for use in ventilation units for residential construction. The company exports its products to more than 25 countries.

Swiss company Zehnder expands footprint in the Netherlands

“To remain leading, major investments are needed. Under the Zehnder umbrella the future of Recair is guaranteed,” said Henk Reijneveld and Gerard Merkx, the two shareholders of the Waalwijk company. The pair look back on a professional and pleasant acquisition process: “The entire transaction went smoothly.” 

This process was advised on by Baker Tilly Corporate Finance, the M&A arm of accounting and consulting firm Baker Tilly. “In close consultation with Lorijn van Leersum and Bas van Klaveren [the dealmakers] a list of potential buyers was drawn up,” said Reijneveld. “With the help of the international network of Baker Tilly, potential buyers were approached anonymously and, after signing a confidentiality agreement, the parties have received the information memorandum from Recair. As a result of this process, several parties decided to make a bid. We entered into discussions with these parties, and Zehnder emerged as the most suitable candidate.”

With the buyer clearly in sight, Baker Tilly set up the data room to facilitate the due diligence process, after which the firm supported Recair with drafting and negotiating the various contracts. The legal aspects of the transaction were supported by colleagues Marcel Ploegsma and Lex Janssens. Meanwhile, at the other side of the deal table, M&A advisers from Dommerholt Advocaten (Edo Nijdam and Rick van Betten) and De Jong & Laan (Peter Miedema) took responsibility for supporting Zehnder’s interests.

As part of the integration, Recair will continue as an independent entity within the Zehnder Group. All employees have transferred to the new owner, with the two founders of the company staying on board. 

The market for heat exchangers and other heat systems is currently undergoing strong growth. Due to the growing need for sustainable housing and the focus on more healthy and comfortable working environments in offices, demand for such products and solutions is on the rise. According to a study by a US-based analyst firm, global spending on heating, ventilating and air-conditioning products have grown to over $65 billion. Among the largest players in the segment are companies such as Johnson Controls, Honeywell, Daikin, Lennox, Ingersoll Rand, Samsung Electronics and Siemens Building Technologies.

Firms struggling with turning M&A deals into equity value

18 April 2019

At a time when merger & acquisition activity is on a high, new research highlights that a majority of deals closed aren’t in fact contributing to equity improvements. 

To come to their conclusion, researchers at Willis Towers Watson and Cass Business School analysed the performance of all deals closed in the first quarter of this year with a deal value of above $100 million. For all those deals, 180 in total, the share price of the acquirer was tracked, and benchmarked against an index (MSCI World Index) which monitors equity performance across 20+ developed countries. 

The analysis found that across all regions globally, deals on average had a negative result on the equity value of the acquiring party. Buyers in North America and Asia-Pacific in particular struggled with value creation from their acquisitions. In the US and Canada, companies that were involved in a takeover or merger had a negative performance of 10.1 percentage points compared to the North American index. Asia Pacific buyers lagged 5.0 percentage points behind their regional index. 

Globally, the average stood at 5.4 percentage points behind the index. “The international M&A market as a whole is showing disappointing results, on the back of a volatile transaction climate and global political uncertainty, from trade wars to increasing protectionism,” said Gabe Langerak, a Dutchman who leads Willis Towers Watson’s Mergers & Acquisitions practice for Western Europe.Firms struggling with turning M&A deals into equity valueEurope however bucks the trend and is the only region where large mergers & acquisitions in the first quarter of 2019 had a positive impact on the stock prices (2.8%). Langerak: “The relatively stable – or less unstable – political and economic situation seems to turn out beneficial, and as a result European companies have outperformed their international peers.” It is not just a short term catch – the continent has been performing better for years, with the three-year average at 5.1% above the index. 

Striking, according to the researchers, is that international deals are outperforming national deals. For example, cross-border transactions score 0.9% higher than the index, while cross-regional deals even surpass the index by 3.1%. 

While the ‘financial’ performance of M&A deals is by no means impressive, there are however little signs of deal activity to slow in 2019. “Growing cash reserves, technological disruption and the stagnating growth of emerging markets are still pushing companies towards the M&A market,” explained Langerak. A recent report by Bain & Company found that global merger and acquisition activity spiked last year, growing from $2.9 trillion in 2017 to $3.4 trillion in 2018

The role of private equity, which accounts for a large share of deal activity, is another force lifting M&A activity. Investors are cash rich, and face pressures to spend the money in order to help their backers (mostly institutional investors and family offices) reap better than market average returns. According to one estimate, private equity now sits on $1.7 trillion of funds that is available but can’t be invested (‘dry powder’), with investors struggling with higher multiple and a limited supply of top, well priced targets. “As potential candidates now seem more expensive than during previous M&A peaks, such as in 1999 and 2008, it is more difficult than ever to close successful deals.” 

Langerak concludes with a tip for deal makers; “For M&A experts that want to make a move, it is key to focus on selecting the right acquisition candidates. Proper preparation, integration and the right people are essential to gain the right insights before taking a leap.”