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dc.contributor.authorClaeys, Arthur
dc.contributor.authorDerdelinckx, Simon
dc.contributor.authorLijnen, Giel
dc.date.accessioned2021-04-27T19:01:55Z
dc.date.available2021-04-27T19:01:55Z
dc.date.issued2019
dc.identifier.urihttp://hdl.handle.net/20.500.12127/6782
dc.description.abstractAs part of the master’s in Financial Management at Vlerick Business School, a research project was conducted on behalf of Sofindev, a Belgian incumbent PE company. The research is part of the expansion of Sofindev's investment focus. Currently, Sofindev only invests in companies located in Belgium. In the future, it wants to make investments in the Netherlands as well. To make the entry into the Netherlands successful, the goal of this study was twofold. Firstly, the aim of the research was to find out and analyse Sofindev's positioning and market perception. Gaining insights into its current positioning on the Belgian market should allow Sofindev’s management to improve its weaknesses and to take better advantage of its strengths. Secondly, this research aimed to study the Dutch PE market in preparation for a possible entry of Sofindev into this market. The study on Sofindev's positioning and market perception on the Belgian market was conducted with the help of a survey and several interviews with people active on the Belgian M&A market. The results of this study show that Sofindev is seen as a very experienced PE company with a strong track record and a good reputation. The company's greatest asset is its management. More than 75% of the participants in this study indicated that management is very professional and acts as a close partner for entrepreneurs. In the survey, management experience received the highest score (8.24 out of 10). Moreover, the interviewees indicated that their collaboration with Sofindev was a great experience because the management is always well prepared and clearly responds to the needs of the entrepreneurs. According to them, Sofindev is successful in building relationships with its entrepreneurs and this is considered a strong advantage because the respondents indicate that entrepreneurs – in addition to price – attach great importance to the connection they have with the management. Besides the strengths of its management, it appears that Sofindev’s investors are a great added value to the fund as well. The Colruyt family and the listed investment company Sofina add value through their good reputation and their extensive network. In addition to Sofindev’s main added value contributors, this research investigated whether the investment characteristics of the company are clearly known by the market participants. The research shows that the respondents consider Sofindev to be a PE company that is mainly active in the buyout segment and wants to take majority stakes with a planned exit at least five years after its investment. These results are consistent with how Sofindev wishes to position itself. Nevertheless, the perception of the respondents about the equity ticket that the company applies does not correspond to reality. In reality, Sofindev invests between €5 mio and € 25 mio in equity per deal. The results show that the respondents mainly thought that Sofindev is investing in the lower equity segment, namely between €5 mio and € 15 mio. A possible explanation for this can be the fact that some of the respondents believe that Sofindev is rather In-Company Project conservative in terms of pricing. Therefore, financial advisors can think that they are less suitable for a deal if a larger equity ticket is required. Another possible explanation may be linked to Sofindev’s current marketing initiatives. The respondents mentioned that Sofindev takes a too modest attitude. The company has a very good track record, but does not leverage this to remind corporate finance advisors and other market players of their capabilities. Moreover, Sofindev could approach the advisors more proactively as this is a distinguishing factor of some of its competitors. With its new fund in prospect, it is important that Sofindev sends out a clearer signal to the market that it is also active in the larger equity segment, in order to prevent that they will not be informed about some potential deals. Finally, the research of the Belgian PE market also focused on Sofindev's main competitors. The results of both the interviews and the survey show that Sofindev’s main competitors in the Belgian market are Down2Earth Capital, Gimv, Bencis and Gilde equity management. They are considered as their main competitors with regard to their broad local market knowledge, their strong track record, and their buy and build capacity. Gimv and Bencis are considered to be two really important competitors, however, they have an additional differentiator. They both are considered more international than Sofindev. If Sofindev wants to keep its current competitive position, international exposure is needed. Nevertheless, the penetration of the Dutch market can already cope with this. In addition, most of the respondents indicate that the move to the Netherlands is a good idea. They expect extra opportunities and do see benefits for Sofindev and its Belgian participations, because there is already a lot of business going on between the two countries. However, everyone agrees that it will not be an easy task. The second part of this study is dedicated to the analysis of the Dutch PE market. Since Sofindev has the ambition to enter the Dutch market, the characteristics of the Dutch PE market were analysed and compared to the Belgian market. This was mainly done through desk research. The results of the desk research were subsequently cross-checked by conducting personal interviews with advisors within the Dutch M&A sector. Moreover, these interviews aimed to discover how Sofindev can successfully become active on the Dutch market. Research of the characteristics of the Dutch market shows that the PE market has experienced strong growth during the past year. Over the period 2012-2018, Dutch PE investments increased more than five times and grew by a CAGR of 28.88%. This growth was mainly driven by a strong increase in buyout investments. Most deals were realized in the equity ticket segment €1 mio - €25 mio, with an increase observed in recent years in the €5 mio - € 10 mio and €10 mio - €25 mio segments. This can be a favourable observable trend for Sofindev since its equity tickets are in the same range. On the other hand, the competition in this segment is fierce. According to the interviewees, most of the Dutch PE companies are active in the mid-market segment. In this segment, Sofindev not only has to deal with local PE parties, but also with Belgian and other international players. According to the interviewees, its main competitors on the Dutch market In-Company Project are again Bencis and Gimv, but also Capital A, Egeria, Gilde Equity Management, Mentha Capital, De Hoge Dennen, Nordian, NPM, Vendis, Smile Invest and Waterland. These parties are strongly represented on the Dutch market and – like Sofindev – sector agnostic. Therefore, they can pose an important threat. Another characteristic of the Dutch PE market is the clear preference of PE parties to take a majority stake. According to the interviewees, minority interests are not often taken. This can be an opportunity for Sofindev if they choose to take significant minority stakes as well instead of only taking majority stakes. However, the advisors warned about a potential impact loss on business decisions and control if a minority interest is taken because the Dutch entrepreneur will be less willing to meet all the requirements – such as granting a board position or approval ask for CAPEX above a certain amount – of the PE party. Finally, the Dutch PE market is strongly characterized as a market in which deals mainly go through M&A advisors and auctions. Although Sofindev has a good reputation in Belgium regarding proprietary deal sourcing, this is less done in the Netherlands. The main explanation for this is the professionalism of the Dutch market which is – according to the interviewees – the most important difference with the Belgian market. In Belgium, it is not unusual that proprietary deal sourcing is still present as the market is less professional than the Dutch market. Given the characteristics of the Dutch PE market and the differences that exist with the Belgian market, it is crucial that Sofindev enters the Netherlands well prepared. The interviewees recommend Sofindev to realize more than a single deal in the Netherlands. If only one deal is closed, Sofindev will remain an unknown player on the Dutch market as this deal will only be linked to opportunistic behaviour and not necessarily to sustainable value creation. Moreover, Sofindev must carefully select its first deal because it will determine their future success in the Netherlands. The advisors recommend Sofindev to realise its first deal in a sector in which it has some experience and already achieved success in the past. In addition, Sofindev can leverage its Belgian track record in the Netherlands to prove their capability. Dutch entrepreneurs will certainly appreciate this. Furthermore, it is not necessary that Sofindev must significantly change its investment characteristics. It can continue to apply the same EBITDA margins criteria as they apply in Belgium and retain their generalist approach, if they clearly communicate their value proposition. In addition to the importance of their first deal and the persistence of its activity in the Netherlands, it is recommended that Sofindev will approach the Dutch market with the help of a Dutch partner and local presence by means of a flex desk or a permanent office. A Dutch partner will provide Sofindev with local market knowledge and with a Dutch network. Moreover, with its physical location and the recruitment of a Dutch partner, Sofindev will send a clear signal of longterm commitment to Dutch entrepreneurs and advisors. In short, opportunities do exist on the Dutch PE market but Sofindev needs a clear vision and structured market approach with local presence and representatives to outperform the competition and guarantee long-term success.
dc.language.isoen
dc.titleAssessing how an incumbent private equity player can continue to play a leading role in the belgian private equity market and how it can become relevant in the Dutch private equity market
refterms.dateFOA2021-04-30T08:27:41Z
dc.source.numberofpages105
vlerick.knowledgedomainAccounting & Finance
vlerick.supervisorLuypaert, Mathieu
dc.identifier.vperid132517
vlerick.companynameSofindex
vlerick.companysupervisorCamerlinck, Jan
vlerick.programmeMFM
vlerick.typebusresprojectIn-Company Project


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