Dealmakers expect an increase in deal volume in 2024

Last modified: 21 December 2023 14:12
"There has been more realism in the market."

Dutch M&A professionals are largely positive about next year’s acquisition market. 55 percent expect an increase in deal volume.

This is evident from the Dutch M&A Trend Survey 2024 by M&A and Ansarada.

The majority among Dutch M&A professionals (55%) expect an increase in deal volume over the next twelve months. Of these, twelve percent think it will be a strong increase (of more than 10%) and 43 percent think it will be a small increase (between 2 and 10%).

Of the respondents, 25 percent expect the deal volume to remain the same and twenty percent predict a decline in 2024.

The Dutch M&A Community is more positive than last year. At that time, only eighteen percent of dealmakers expected a small increase and zero percent expected a strong increase. It should be noted that this was in comparison to 2021, which many M&A professionals considered a record year.

Buyers and sellers have accepted new realities

Many dealmakers expect a slight increase in the number of transactions in the coming period. “It was very quiet at the beginning of the year, but you can see that the market has picked up somewhat recently,” says Ida Kuijken, Partner at Fortino Capital, a B2B software venture capital & growth equity firm. “There is more confidence in the market and you see that companies are gradually confronting the questions: ‘How can I trigger the next phase of growth? What do I need for this and do I bring a partner on board for that?’.”

There were many uncertainties in the past year surrounding interest rates, the appetite for takeover financing at banks, and high inflation. “The market has now largely accepted the new reality,” says Lesley van Zutphen, Managing Partner at Bencis Capital Partners. “Some of that uncertainty has now disappeared from the market, which is why I expect a small increase in deal volume. Small, partly because banks remain cautious with financing. The growth in the post-corona year and the years before that is no longer there for many sectors for the time being.”

Certain sectors are doing better than others. According to the respondents, the healthcare, energy sector and ICT are popular among investors and corporate buyers. “You are talking about an increase of two to ten percent,” says Sergio Herrera, Managing Director M&A at Rabobank. “I agree with that, but especially in the top sectors mentioned.”

A more favorable investment climate

A number of top advisors interviewed are more positive. ING will therefore be confidently investing in the M&A market in the near future, both in the Netherlands and internationally. A sign of this confidence is that the corporate finance team has been given the mandate to grow by about ten percent, from 200 to around 220 bankers. This also has consequences for the top: Rob van Veldhuizen‘s (international) mandate has been expanded and Marco Gulpers is moving under him to a managerial role of the Dutch team.

For the next twelve months, both dealmakers are ‘bullish’ and expect a strong increase. In preparation for next year, the pipeline is already filling up, they see at ING, and more ‘kick off meetings’ have been taking place recently for purchasing and selling processes that will be completed in the coming years. This has to do with the fact that after a few uncertain months, stability is returning to the market: interest rates and inflation are stabilizing and the financing market is opening up further.

Peter Toutenhoofd, Head of M&A Advisory Netherlands at BNP Paribas, is also betting on a strong increase of more than ten percent. Toutenhoofd’s positive expectation is motivated by three factors. “Firstly, interest rate increases now appear to be stabilizing, which has a favorable impact on the investment climate, especially for private equity. Secondly, there is still a lot of capital that needs to be put to work in private equity. You also see in the leveraged finance and bond markets that the demand for good assets is extremely good. And finally, I think the gap between buyers and sellers has narrowed; more realism has emerged in the market. If you take these factors together, I think volume will increase by more than ten percent. I am very positive. Of course, geopolitically unforeseen things can happen that throw a spanner in the works.”

Bas Glas, Senior Partner at Gilde, also thinks that ten percent might be feasible. But this depends on the developing economic situation in Europe and the US, as well as geopolitics. “The current sentiment is fragile, especially in Europe,” says Glas. “A soft landing for the American economy may be possible, but the European situation seems more uncertain. If the coming months remain calm, the deal volume may increase more, but otherwise a slight increase or sideways movement is more likely. Note that this would be an increase from the low deal volume of the past twelve months.”

More complexity in takeover processes

Some participants in the trend research are less enthusiastic in their expectations. For example, Katinka Middelkoop and Gijs Linse of law firm Allen & Overy think that the deal volume will remain the same. Gijs Linse: “It is still a healthy M&A market, but you notice that it is less busy than last year. The type of deals and quantity are different than a year ago. Healthy companies that start a healthy sales process are still possible. But as soon as there is a blemish in the company, or a complicating factor occurs, you notice that processes break down more quickly. And what you also see is that in complex transactions, companies are more willing to use complex structures to make the deal a success. We see fewer straightforward transactions.”

Katinka Middelkoop: “If you look at the reports on M&A activity worldwide, you see that it is less than normal. The number of billion-dollar deals is decreasing, that is a global trend. Yet we were very busy in the Netherlands last summer, but it did not always result in things being signed. For example, that we assisted a buyer who ultimately did not win the deal, or that we were on the selling side and an auction did not go ahead. Normally, many auctions start in September, by which time all the preparatory work has been done, and we now see that far fewer deals have been put on the market. The parties may still want to start auctions later in the year with the aim of completing the deal before the summer of 2024. I expect it could be a messy year.”

Read also: Financing in M&A: challenges and opportunities for 2024

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