How JBR advised ASML supplier HQ Pack on securing its sale

04 July 2023 21 min. read

HQ Pack, a Dutch company specialised in high tech packaging solutions, has secured a major investment from investor NPM Capital. Dealmakers Ronald van Rijn and Thomas van Amerongen – who served as exclusive financial advisors to HQ Pack – explain how they supported the deal while navigating the rapidly changing worlds of technology, economics and geopolitics.

ASML is a Dutch multinational corporation founded in 1984. Headquartered in Veldhoven, the company gives the world’s leading chipmakers the capabilities to mass produce patterns of silicon, aiming to make computer chips smaller and faster than ever before.

The increasingly important role of chips in the digitizing global economy has seen ASML propelled into the position of one of the world’s most important companies. For context: TSMC, Samsung and Intel – the three largest chip manufacturers in the world – all depend on ASML for their products.

Het bijzondere verhaal achter de verkoop van HQ Pack

However, ASML’s frontrunning role in the strategic semiconductor sector has also thrust the unsuspecting group into the middle of escalating hostilities between the US and China. In January the US struck a deal with the Netherlands to further limit the sale of its advanced ASML chip machines to its largest economic rival, China.

Ten days before the news of the agreement was announced, another deal had been brokered. Investment company NPM Capital had taken a major interest in HQ Pack, an Eindhoven-based packaging solutions company. To outsiders, the two deals seem unrelated, but in reality, they both stem from ASML’s meteoric rise.

“The sale of HQ Pack can be seen as a ‘cornerstone deal’ within the ASML ecosystem,” explains Ronald van Rijn. “ASML is growing fast due to its role on the world stage, and suppliers have to keep up with that growth. Under the wings of NPM Capital, HQ Pack has the ability to do this.”

Van Rijn is the Managing Partner of JBR, a Netherlands-based strategy and management consultancy. The firm’s corporate finance team guided the selling founder of HQ Pack through the entire divestment process – something which unexpectedly saw them step into “a special world that we barely understood ourselves at first”.

What might appear a run-of-the-mill deal to outsiders was complicated by several facets of geopolitics and dependencies with ASML’s fate. Finding the answer to delicate – and unexpected – sector intricacies turned out to be one of the most fascinating mandates that experienced strategist and dealmaker Van Rijn and his team have worked on.

The ecosystem

The story of HQ Pack began roughly 20 years ago in Eindhoven. At the time it was called Hakapak and was more of a traditional packaging company. Driven by the thriving technology sector around Eindhoven, more and more focus was placed on the high-quality segment. As this shift progressed, HQ Pack pivoted its model increasingly around ASML.

“What you have to understand is that ASML is not a manufacturing company,” explains Van Amerongen, Senior Corporate Finance Consultant at JBR. “They don't produce anything themselves. They develop, have parts produced and assembled. This means that there are many suppliers around ASML – from major players such as VDL Groep and lens maker Zeiss to smaller producers of metal parts, precision cleaning companies and much more.”

What JBR’s team soon learned was that the high-quality standards set in the ecosystem are “unmatched”. According to Van Amerongen, even the pharmaceutical sector does not come close to the requirements that ASML sets for suppliers, “both in terms of precision and purity.”

Van Amerongen adds, “To give an impression: HQ Pack works with ISO Class 7 cleanrooms and the packaging is checked for residual particles using UV light. A package can cost 500 euros, but also 50,000 euros.”

HQ Pack’s strategy on transitioning to a company with a pure ASML focus has been a successful bet. This was in part thanks to its visionary leadership.

“It might not seem very logical to bet all your money on one horse, but HQ Pack made that decision 15 years ago against an entirely different backdrop. That is really the credit of the founder,” Van Amerongen expands. “He was ahead of the time: he didn’t ask what ASML needed but did what he thought ASML needed. He built cleanrooms in Eindhoven and expanded to Asia and the United States because ASML also went there.”

“So before ASML even approached HQ Pack, the company was already there, and you need guts doing that.”

The founder of HQ Pack was a visionary in spotting that microchips would become the building block of the digital world. With the world digitizing at a dizzying pace, there are countless products today that use microchips.

As the world's leading supplier of chip machines, ASML is an indispensable link in the microchip sector. For those who want to produce the most advanced chips, there is not even an alternative: ASML is the only company in the world that makes the so-called EUV machines that are required for this.

Thomas van Amerongen en Ronald van Rijn

Outgrowing your shell

In sum, this unique position and the sky-high demand for chips means that ASML is growing very fast, and anyone who wants to continue to operate in the ecosystem around the company must follow suit. It was this context which urged HQ Pack to find a financial investor.

“Within the ASML ecosystem, you’re seeing many suppliers growing out of their structure,” explains Van Rijn. “They are becoming so big that they need a corporate-like structure. It calls for professionalisation – different systems, different leadership, further internationalisation. All this involves major investments. And all in all, it can also be a reason to think about future ownership.”

In the case of HQ Pack, the firm’s founder had again shown his vision, already realising that things were going “so fast” that more financial muscle and governance was needed. He installed a chief executive officer, realising the time was right for someone else’s knowhow and clout to help scale the firm.

Under the new leadership, HQ Pack put out a tender for experts to find a suitable buyer. JBR won the bid vis a vis several corporate finance houses and commenced the search – but the engagement turned out to be a special challenge for several reasons.

Firstly, potential buyers and financers had to be taken step by step through the extraordinary story of HQ Pack. “It is an incredibly valuable company with even greater potential, but before you see that you have to understand the company and the world in which it operates,” explains Van Rijn. “We didn't see it right away either.”

Part of the explanation concerned the special relationship with ASML. Something which Van Rijn notes “creates fear” in buyers who “don't understand that world”. Depending so overtly on a single customer begs the question, what if ASML suddenly drops out?

“But HQ Pack has deliberately positioned itself completely towards ASML,” says Van Amerongen. “They started doing that fifteen years ago, so if a competitor wanted anything at all, it would be fifteen years behind. There is no second supply chain partner like HQ Pack. In short: there is a dependence, but it is mutual.”

Hard sell

Candidates who did not understand the mutual dependency with ASML immediately dropped out. But the process was also complicated by the buyer having to meet quite a few conditions – meaning HQ Pack also turned out to be too ambitious for many others.

“Our client initially tended towards a strategic buyer,” says Van Rijn. “But because HQ Pack is already quite large and really operates in a niche, strategic buyers quickly pulled out: it is too big and too specific. But if you opt to do business with a financial party, you become dependent on bank financing. Moreover, HQ Pack was too big for one bank, so it would require a ‘club deal’ and therefore usually also foreign banks.”

In the end, HQ Pack still forged ahead with the focus on a financial player – but it recognised this had to be a party with a long-term horizon. An investor who would simply sell on again after a few short years was not the intended partner. Meanwhile, with the founder and management retaining an interest in the new set-up, it was also important that there would be a personal and cultural click with the buyer.

As the only major customer of HQ Pack, ASML also had its say in the selection process. Van Rijn: “ASML had preferences” suggesting the company might not have been happy “if suddenly a Chinese investor comes along”, to give an extreme example.

In addition to all these factors, during the deal process JBR also had to deal with countless developments beyond its control. Shortly after the search began, Russia invaded Ukraine and the world suddenly changed.

“Of course, that also affects such a sales process,” says Van Rijn. “Questions arise: what are the consequences for the economy and for chip use? How do banks view it? How is private equity doing – do they still dare to take on these kinds of big deals? The M&A market has of course cooled down somewhat.”

But despite all the economic headwinds, HQ Pack continued to grow. Last year, growth eventually hit 50%, according to Van Amerongen, who adds that the company has “exceeded all expectations in our information memorandum”, even in a world that is very turbulent. This helped attract attention, and JBR was “gradually able to focus on an increasingly better deal.”

Interesting times

That deal came in late 2022. Just before Christmas, the contract was signed, with NPM Capital now holding the majority of the shares. The investment vehicle of SHV, the largest family business in the Netherlands, paid several-hundred million for a majority stake in the firm, according to sources reported in local media.

But with the new trade limitations imposed by the US and Dutch governments, had a spanner been thrown in the works at the 11th hour? With their new knowledge of the chips market, JBR’s professionals are confident that this is not the case.

HQ Pack breathes with ASML, but it is highly questionable whether ASML will be affected by that boycott at all,” asserts Van Amerongen. “The world is yearning for more chips and they have to be made somewhere. If it’s not China, it’s Taiwan or South Korea.”

Van Rijn and Van Amerongen maintain the world need not worry about ASML and HQ Pack on this basis. Such is their confidence, that in the coming period, they are looking to use their knowledge to help buyers penetrate the ASML ecosystem.

“There are few parties that have completed such a transaction,” says Van Rijn. “We are approached a lot – from the Netherlands, but also from the US, for example. The case of HQ Pack is unfolding at many other suppliers – they must continue to grow. In addition, more and more companies are waking up. They see how huge this world is and what opportunities there are. It will be interesting times.”