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The Netherlands private equity market - an overview

The Dutch private equity market has expanded over the last few years says Loyens & Loeff. However, it experienced a slump last year and by the second half of 2000 there was a surplus of funds available for investment in the Netherlands. However, it still ranked fifth in western Europe for private equity investments made.

The private equity market in the Netherlands is relatively mature with investment interests covering a variety of sectors. Portfolios range from life sciences and information technology to the more traditional industries and services. Funds also vary in their geographic focus - regional, national and international funds are present.

The market
About 60 private equity firms are members of the Nederlandse Vereniging van Participatiemaatschappijen (NVP), the Dutch venture capital association. A substantial number of these are independent, but many are captive - they belong to a bank or insurance group.
Capital investment by Dutch private equity funds has been increasing annually. In 1999, the members of the NVP invested approximately NFL3.4bn - an increase of 40 per cent on 1998. Total divestments amounted to nearly NL1bn, an increase of ten per cent compared to 1998. The aggregate amount of invested capital increased from NFL7.3bn in 1998 to NFL9.7bn in 1999.

Open and closed-ended funds
Dutch private equity funds are divided between evergreen funds (open-ended) and funds formed for a limited period, on average ten years (closed-ended). Both types of funds exist in the Netherlands, with an increasing number of closed-ended funds.

In 2000, a number of Dutch private equity firms set up new (closed-ended) funds, with increasing interest from non-Dutch investors. Foreign private equity houses became serious players on the Dutch market, with 3i as the most prominent among non-Dutch investors.

General investment and favoured sectors
For investments made in 2000, the Netherlands ranks fifth amongst western European countries (behind the UK, Germany, France and Italy). In 1999, Dutch venture capital firms invested approximately NFL3.4bn. A breakdown of this amount shows that about NFL1.1bn was invested in follow-on (expansion) investments, about NFL0.9bn in seed capital and start-ups, and about NFL0.8bn in buy-outs. According to data published by the NVP, NFL2.1bn of the NFL3.4bn (63 per cent) was invested in companies that had not received private equity funding before.

The average private equity investment was NFL4.5m in 1999. Dutch venture capital firms made about 75 per cent of their investments in the Netherlands, with the remainder mainly in western Europe. The IT sector was one major area of investment - in 1999 it received 21 per cent as opposed to nine per cent in 1998. But by the second half of 2000, there were surplus funds available for investment and the investment level had declined, particularly in this sector.

Divestment
The most common method of exit in the Netherlands is a trade sale. Only a small proportion of exits are through an IPO (Initial Public Offering). Divestments for 1999 totalled NFL1bn.

Important Dutch players on the private equity market

NeSBIC
NeSBIC is one of the larger, more experienced firms in the Benelux venture capital industry. It is owned by the Fortis group, which owns a maximum of 33 per cent of the total fund capital. This is to ensure that it attracts and secures the interest of other shareholders.
The firm set up three new funds in 2000: NeSBIC CTe Fund II - with commitments of €250m*; NeSBIC Buy-Out Fund - with commitments of €170m and NeSBIC Investment Fund II - with commitments of €120m. These new funds attracted a substantial number of non-Dutch investors.

The NeSBIC funds invested in companies such as Detron and VersaTel.

Gilde
Gilde is one of the leading private equity investors in the Netherlands, with more than €1.5bn currently under management. The Gilde management organisation is owned by Rabobank but, as in the case of NeSBIC, the equity interests taken by Rabobank in the newly established funds is limited. Gilde recently formed three new funds, each with an independent management structure: Gilde Buy-Out Fund II, Gilde IT Fund II and Gilde European Food & Agribusiness Fund.

Gilde recently took the lead in a closed public-to-private transaction in which it made a public offer for all outstanding shares in NORIT listed on the Official Market of the Amsterdam Stock Exchange (AEX).

Prime Technology Ventures
Prime Technology Ventures is one of the more recently established Dutch venture capital firms formed without the support and means of a financial institution. Prime Technology Ventures was initiated by an independent team, and recently closed a fund of €60m.

NIB Capital
NIB Capital, the largest player in terms of available resources, is a newly formed combination of De Nationale Investeringsbank, PARNIB and Alpinvest. ABP and PGGM, two of the world's largest pension funds, are the shareholders of NIB Capital. NIB Capital Private Equity is the venture capital division, and is involved in fund investment, direct investment and co-investment. As of March 2000, it had invested assets of up to €5bn.

Atlas Venture
Atlas Venture was originally formed as a Dutch venture capital firm. Over the years, it has become an independent firm, with rapid international growth. It established a new fund in 2000 (Fund V) with a total committed capital of €750m. It is in the process of setting up Fund VI. Today, with management in London and Boston, Atlas Venture can hardly be considered a ‘Dutch' fund any longer.

Other key players are 3i, CVC, EQT (Dutch), Life Sciences Partners, NPM Capital, Parcom Ventures, Residentie Investments and Waterland Private Equity Investments.

Government incentives and initiatives
The Dutch government is not directly interfering with the private equity market, with the exception of a few modest tax incentives. With regard to tax, general rules and regulations still form a major obstacle, especially to foreign investors investing in Dutch funds. Unlike other countries, it proves extremely difficult to set up a fiscally transparent limited partnership as an investment vehicle for the Netherlands. In addition, the advance clearance policy on the tax position of the funds and their investors becomes more and more restrictive.

During 1998, the Ministry of Economic Affairs initiated the Twinning project (incubator) aimed at supporting start-ups, predominantly in the IT sector.

* €1=NFL2.204 on 29/03/01

 Marco de Lignie is a member of the Loyens & Loeff venture capital team

Loyens & Loeff is a law firm based in the Netherlands. It has a team of attorneys, tax advisers and civil law notaries dedicated to private equity. With offices across the Benelux, the firm's private equity team can offer advice on structuring new funds and provides legal services to institutions investing in private equity funds. For more information, please contact Marco de Lignie or Liesbeth Hendrix on +31 20 578 5785, or go to www.loyensloeff.com

© Loyens & Loeff, Amsterdam, March 2001