2017 M&A Monitor: Shedding light on M&A in Belgium

Abstract

Following an annual tradition, this M&A Monitor presents an overview of current trends in the Belgian M&A market. Based on survey responses of 120 M&A experts in Belgium, we present unique insights into the evolution of M&A activity, typical multiples, deal structures and process characteristics. Every year, we devote special attention to one particular aspect of M&A. In the current edition, we focus on cross-border transactions by Belgian acquirers, representing around one third of all deals that the surveyed experts have worked on. The most targeted countries in Europe are France, The Netherlands and Germany. Despite a global drop in M&A activity (from a record level of $4.5 trillion in 2015 to around $3.5 billion in 2016), Belgian M&A volume is still growing intensively. Two out of three respondents observed an increase in Belgian M&A activity in 2016. Moreover, only 10% of all experts anticipate a possible drop in 2017. While we observe a similar picture for Belgian targets acquired by international companies, more conservative growth numbers are expected for cross-border takeovers by Belgian acquirers. An uncertain political climate as a result of the Brexit, Trump’s US protectionism, and upcoming elections in several EU countries might impede Belgian acquirers from pursuing a cross-border external growth trajectory. The continued traction in the Belgian M&A market is also reflected in elevated multiples. The average Enterprise Value (EV)/EBITDA multiple rose for the fourth year in a row towards a level of 6.4. Belgian acquirers are even found to pay on average 7 times EBITDA in cross-border acquisitions. Academic evidence indicates that cross-border acquirers are willing to pay higher premiums because of the cross- border targets’ country-specific knowledge and local distribution networks. The respondents indicate that bank financing is readily available at cheap rates and has improved especially for the segment of deals worth less than €5 million. The average ratio of net financial debt (NFD)/EBITDA for this segment of smaller transactions increased from 2.1 in 2015 to 3.3 in 2016. Banks seem to increasingly consider acquisition financing of smaller companies with a proven track record as an alternative source of income, leading to looser credit standards. In line with rising bank financing, a decline in the amount of (semi-) equity that is needed to finance an MBO/ MBI is observed for transactions under €5 million, dropping even below 30% on average. Similarly, the use of vendor loans and earnouts across all deal sizes has diminished significantly. These findings, and many other critical aspects of domestic and cross-border M&A, are explored in detail in this 2017 M&A Monitor.