NETHERLANDS

2021 was a record year for acquisitions, but not in the Netherlands

Media company Warnerbros, British supermarket chain Morrisons and medical device supplier Medline. These are just some of the companies that changed hands for a lot of money in 2021. But precisely in a year when the total takeover reached a record high, Dutch companies refrained from major takeovers, according to research by the American consultancy Bain & Company.

At the beginning of the pandemic, looked around and drivers in despair. Whole trading prices came to a standstill, stock prices plummeted. The acquisition of the Dutch optical chain GrandVision (Pearle) was delayed by Essilor Luxottica, supplemented by that of jeweler Tiffany’s by luxury group LVMH. Blackstone paid a lower price for the Hague bank NIBC.

The astronomical sums paid for company purchases in 2021 prove that one pandemic year is not the same. Entrepreneurs continued to run, with developed. It has led to more optimism on the acquisition front. Until December 7 of this year, companies and investors spent no less than 5,400 billion dollars (4,700 billion euros) on acquisitions in 2021.

According to Bain & Company, which collected the figures from the Dealogic database, it is considerably more than last year’s 3,700 billion dollars. The figure for the year as a whole is expected to be even slightly higher. Reuters news agency reported last Monday based on that Dealogic that the total would already be 5,600 billion dollars. It is also more than in the record years (2007 and 2015) spent on acquisitions: $ 4,600 billion.

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“The impact of corona is for most people a little less great than expected”, Michiel Post, head of investment banking Benelux at the Japanese investment bank Nomura. “A lot of monetary and fiscal support has been given. That has helped the stock market and with it the enthusiasm for acquisitions.”

Quiet in the Netherlands

The biggest deal was struck between two American companies. AT&T sold the media vision with more advanced WarnerBros and HBO for $43 billion to Discovery. In the United Kingdom there was fierce fighting over supermarket chain Morrisons. Private equity party Clayton, Dubilier & Rice ran off with the loot for 7 billion pounds (8.2 billion euros).

In the Netherlands, the sale of T-Mobile stands out. Investment companies Apax and Warburg Pincus bought the Dutch activities of the German company for 5.1 billion euros. Although a deal with a Dutch twist, it was concluded between a German, British and American party. The Rotterdam chemical trading company Caldic exchanged American hands for 1.5 billion to 2 billion euros.

There are hardly any Dutch companies in the list of top deals for 2021. Of course, there have also been enough takeovers in the Netherlands, says Post. „But those are mainly offers up to 500 million euros. Acquisitions in the middle segment. In the past, we saw that companies such as Ahold, Unilever and ING were very active in the acquisition. But they have set up differently for various reasons. For example, for most banks you see that a strategy aimed at global presence is not the right one right now.”

SPAC and private equity are advancing

Bain also had it investigated what kind of acquisitions were being made. The position (63 percent) is by companies, from the point of view. So companies that take over another company or merge with a party that offers a strategic advantage. Consider, for example, a version of car parts that fulfills an important function in the production chain in the current market of chip and raw material shortages. Post: “Companies want certainty about the delivery and therefore prefer to get such a party on board.”

Corporate takeovers grew in all sectors, but especially in the technology and healthcare sectors, buyers were willing to bring significantly more money. Bain calculated dates for investments in 2021 paid an average of 28 times the gross profit for tech acquisitions. For healthcare companies, this was 24 times gross profit.

Remarkably enough, the share of acquisitions in the corporate category in the total acquisition price has been considerably higher in recent years than in 2021. More private equity deals were concluded this year (more than 1,000 billion dollars, 18.5 percent of the total). Investors take over (one of) a company in the hope of selling it at a profit within a few years and profiting from good results in the meantime.

The Special Purpose Acquisition Companies (SPACs) are also on the rise (10.5 percent of the total).

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These are stock exchange funds in which start money in advance and then buy a company that is started in the fund. Among other things, the French About Bernard Arnault put two SPACs on the Amsterdam stock exchange.

Slower pace expected

Several acquisitions are already in the pipeline for 2022. For example, the American investment group KKR is preying on Telecom Italia. Last month, the private equity giant signed an offer of 10.8 billion euros for Italy’s most favorable telecom company. Chemical company DSM is looking for a buyer for its materials division.

Still, Post expects the takeover pace to slow down somewhat. “The number of companies that will come to the market will be lower. Anyone who wanted to sell property from the private equity corner has done so. That will have an effect on the relationship between supply and demand of companies next year.”

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