Deals and M&A in the Netherlands reaches highest point in decade

The number of mergers and acquisitions (M&A) in the Netherlands is at its highest point in ten years, according to research by KPMG. And the number is set to grow further in the coming twelve months as companies target M&A-driven growth, private equity firms are flush with cash, and entrepreneurs believe that now is the time to benefit from favourable market prices.

According to analysis from KPMG, the number of mergers and acquisitions in the Netherlands has hit a record high – building on booming M&A activity in the IT and healthcare sectors. There was an 11.4% increase in the number of transactions, with a leap from 641 in 2016 to 714 in 2017. With the exception of 2012, the number of deals has consistently grown over the past ten years. Since 2009, the annual number of transactions has almost doubled.

Despite the increase in the number of deals closed, the total value of Dutch transactions fell sharply. In 2016, deal value was €89 billion; in 2017 the total value was €51 billion – a decrease of almost 42%. In 2015 the value of M&A deals in the Netherlands was an even larger €179 billion. 2015 and 2016's swollen numbers were, however, driven by a couple of significant deals – Shell’s acquisition of BG Group for €64 billion in 2015, and Qualcomm’s absorption of NXP Semiconductors for €43 billion in 2016.

Though these huge acquisitions can lead to a somewhat distorted picture, 2017 was still a top year in terms of deal activity. While KPMG's analysis concentrates on larger acquisitions, data from analyst firms with a focus on the mid-market show that the number of transactions is also on the rise in the small-to-medium enterprise (SME) sector. And with the transaction rate increase of more than 11% reported by KPMG, the Netherlands has outstripped M&A activity growth in the rest of Europe and the world, which saw growth of 4.2% and 3.7% respectively

The 4.2% increase in Europe saw the number of acquisitions rise to 7,955 in 2017, compared to 7,631 a year earlier. The growth is in line with trends from the last decade: since 2009 – when 3,854 deals were closed – there has been a steady increase in the number of acquisitions. Only in 2012 and 2014 were there very slight decreases compared to the previous year. The total European deal value has also increased, from €862 billion in 2016 to €931 billion in 2017.

Interest from abroad

The analysis by KPMG also finds that the Netherlands is increasingly attractive to foreign investors, who are buying more and more Dutch companies. Last year, 248 acquisitions were made from across the border, accounting for 35% all transactions. This share is almost as large as that of deals made between two domestic parties, which numbered 272 and accounted for 38% of transactions. The remaining 27% – 194 deals – involved the purchase of a foreign company by a Dutch company. The increased foreign interest was driven to a large extent by the high number of deals within the healthcare sector.

As with the total number of acquisitions in the Dutch market, the number of acquisitions from abroad has increased since 2009, with 2012 as the lone exception. Another consistency is that despite the increase in the number of acquisitions, a much lower total deal value was realised – a decrease of €63 billion to €25 billion. In contrast to last year, 2016 saw much more money flow from American companies, a consequence of the aforementioned NXP deal.

Danny Bosker, Partner at KPMG Corporate Finance, explains that the increased interest from across the border, in terms of M&A activity growth, fits in with the trend of recent years: “If we look at past years, we see that the difference between the number of acquisitions by foreign buyers of Dutch and the number of acquisitions by Dutch companies of foreign companies is steadily growing. Net ‘exports’ amounted to 54 transactions last year, almost 75% more than in 2016 and the highest number in the past six years.”

EU and US active

Over the last year – with 146 deals – 59% of cross-border acquisitions were made by EU buyers; the US, however, accounted for a rather large proportion of deal value in the Netherlands, despite the smaller amount of 55 transactions (22% of foreign purchases). “This makes the United States the largest investor in the Netherlands, followed by the United Kingdom, Belgium, France and Germany,” says Bosker. China, often designated the world's future economic power, has yet to play a major role on the Dutch M&A market. With four acquisitions of Dutch companies, the country accounts for a rather slight 2% of deals. The remaining 43 purchases from across the border were from the ‘rest of the world’.

Just like the other way around, Dutch buyers are particularly interested in European and American companies. Bosker commented; “Of the 194 acquisitions by Dutch companies, 65% were from an EU country, followed by 15% in the United States.” This equates to 126 European companies purchased and 29 American ones. In the rest of the world, including China, where nothing was bought at all – Dutch firms acquired 39 companies. “China was not on the radar of any Dutch company last year,” comments Bosker.

M&A outlook

The expectation for 2018 is that the high level of activity in the M&A market will continue. Interest rates remain at historically low levels, which ensures that private equity parties have easier access to capital and are meanwhile are sitting on piles of dry powder. In addition, many sectors are poised to consolidate, with companies striving for growth through the absorption of industry competitors. In addition, the boom in the M&A market is increasing the takeover prices that entrepreneurs can ask for their business, which is increasing their willingness to sell to capitalise on the good market fundamentals.

KPMG – which was recently named one of the best M&A advisers in the Netherlands – points out that there does remain some uncertainty within the merger and acquisition market. “The increased attention given by countries to a more protectionist policy, such as Brexit and the course that the American president is sailing, have consequences for the global market,” says Bosker. 

Bosker also points to the ongoing discussion within the EU about limiting foreign acquisitions, though non-European buyers can still buy-in before it is too late: “It is, therefore, to be expected that the interest in Dutch companies will continue to remain high as long as no additional measures are taken from Europe.”