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NVP survey 2004: the Dutch private equity market27/04/2005. Source: Dutch Private Equity and Venture Capital Association (NVP).
 In 2004 the investments by Dutch private equity firms increased to € 1.7 billion from € 1.1 billion in 2003, a strong rise of almost 60%, says the NVP. The growth of the investments was driven by the developments in the buy-out segment. Investments in seed and start-up financing showed a further decline to € 37 million.
The improved exit climate in 2004 led to a rise in exits, to € 1.2 billion, compared with € 965 million in 2003. The amount of capital available for private equity investments increased strongly. In 2004, the Dutch private equity funds raised € 1.9 billion in fresh capital.
This has emerged from a survey carried out by PricewaterhouseCoopers Corporate Finance on behalf of the Dutch Private Equity and Venture Capital Association (NVP) amongst private equity investors in the Netherlands. The Dutch private equity houses have € 8.4 billion funds under management.
Regarding the developments in the Dutch private equity market, Robert Schipper, president of the NVP commented: 'Private equity plays an increasingly important role in the Dutch economy. In 2004, the private equity firms attracted € 1.9 billion in fresh capital. By now, we have invested in over 1000 companies offering a wide variety of products well known to the Dutch consumer: from bikes, soft drinks, bread to pay checks. Given the current situation in the stock markets and the low interest rates, we expect a favourable climate for private equity investments in 2005.'
Leading role for buy-outs
In 2004, the focus of Dutch private equity firms was largely on financing for mature companies. These investments rose by more than 75% to a record level of € 1.4 billion. The Dutch market saw more than one hundred buy-outs in one year for the first time. Anglo-Saxon players, which did not participate in this survey, were in 2004 involved in several very large buy-outs in the Netherlands, such as directories operator Gouden Gids, non-food retailer Vendex KBB and publisher PCM Uitgevers. The involved investments are estimated at € 1.5 billion.
Very little seed and start-up financing
In 2004, the investments in seed and start-up capital fell by 50% to € 37 million, a level last seen in the early nineties. This drop was due to the fact that little venture capital was available for investments in these segments. A number of funds have pulled out of the market and other funds were almost fully invested and kept their remaining capital available for their existing portfolios.
The NVP hopes that the set of measures drafted by the Ministry of Economic Affairs that are designed to raise funds for this segment, will contribute to the recovery of the financing possibilities.
Good exit climate
Dutch private equity firms were last year involved in exits valued at € 1.2 billion, a rise of roughly 25% compared with 2003. The exit climate for private equity investments improved further. Secondary buy-outs, or the sale to other private equity firms, was one of the most important forms of exit. The public equity market was of little or no significance as an exit channel. The introduction of Alternext, an exchange for mid-sized companies, will possibly offer new exit opportunities.
Successful fund acquisition
In 2004, private equity firms attracted € 1.9 billion in fresh capital, almost 50% more than in 2003. This success in attracting capital underlines the confidence in the Dutch private equity market. Buy-out funds in particular are showing enormous willingness to make new investments.
The Netherlands follows European trends
The Dutch market is more or less following the trends in the rest of Europe. Provisional figures from EVCA indicate that investments also rose in Europe, albeit by a mere 5% to € 30.6 billion, from € 29.1 billion in 2003. As in the Netherlands, investments were dominated by the buy-out segment (68% in Europe versus 71% in the Netherlands).
The amount in exits in Europe increased to € 14.1 billion from € 13.6 billion in 2003. Most exits were realised via the sale to strategic investors and secondary buy-outs. Fund acquisition in Europe fell slightly, to less than € 25 billion from € 27 billion in 2003.
Outlook 2005
The NVP expects that the growth in the buy-out market will continue in 2005, while large transactions will play an ever increasing role. With the improved economic environment, large corporations could well identify opportunities to divest non-core activities. Smaller listed companies are becoming increasingly interested in the possibilities private equity can offer as an alternative financing means. As for now, there is plenty of capital available for buy-outs.
The NVP foresees a further increase in growth financing. Currently, a number of funds is being established, that will focus on the financing of mature enterprises, that wish to grow their activities in new products or new markets. These funds will start their activities later in 2005.
While investments in seed en start-up capital will remain limited in the short term, NVP expects a slow recovery in the longer term. A small number of highly dedicated investors will focus again on innovative technologies.
The exit climate will improve further, if the more positive economic outlook becomes reality. A recovery of share prices could lead to new exit possibilities for private equity firms. For now the low interest rate offers possibilities for refinancing of bank loans.
The survey for 2004 is indicative of the Dutch private equity market. The vast majority of the capital invested by Dutch private equity firms is represented in the study. The survey into the Dutch private equity market is carried out annually by the PricewaterhouseCoopers Corporate Finance for the NVP. The aim is to give an insight into the funds raised, investments and divestments.
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The Dutch Private Equity and Venture Capital Association aims to act as a starting point for entrepreneurs and their advisors in the selection of a private equity firm; is a source of information about the private equity market and their associated private equity companies, among others through the NVP Yearbook; acts in the interest of its associated private equity companies and forms a contact forum for the industry; and promotes an ethical and responsible business conduct within the industry. For more details see www.nvp.nl
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