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The Netherlands private equity and venture capital quarterly update

Survival of the fittest

As Continental Europe’s most mature venture capital and private equity market, the Netherlands boasts an experienced population of domestic unquoted investment specialists, including pioneers such as Atlas Venture, Alpinvest, Gilde, NeSBIC and NPM. The nation’s buyout sector is developing strongly and deal flow has been tremendous, but, as with the rest of Europe, the easy days are over and players are approaching investments with caution.

In the Netherlands, euro997 million was invested in 415 companies, according to the European Venture Capital Association (EVCA) Mid Year Survey 2000. Almost half of respondents felt that investments were up, while around 16% experienced a decrease. The first six months saw a relatively high level of activity in venture capital, with over 63% of investment compared to 54% for the whole of Europe.

High tech accounted for 31.5% of total investment value. Almost 90% of this high tech investment was in seed, start-up and expansion, with relatively few deals found in replacement capital and buyout. Divestments amounted to euro320 million in 149 companies.

Investment climate

A major characteristic that differentiates the Netherlands from other continental markets, is the country’s level of funded pensions. The existence of domestic pension funds such as ABP and PGGM, which have combined assets of around euro300 billion, is one of the principal factors underlying the relative maturity of the private equity market.

The current investment climate varies as to how mature the VC company is and the amount of money available for investment, says Herman Delatte of NeSBIC.

“Companies in the Netherlands are placing great importance on making sure they have enough money in the till to keep their companies in profit, with a greater focus on the ‘path to profitability.'”

In a period of consolidation and shake-out, as Delatte describes it, players are looking at deals that already have revenue such as spin-offs from larger companies. Last year saw a lot of deals where valuations were high. For this year, opportunities are looking more realistic. The new year is to bring more of a focus on later-stage deals and it is anticipated that increasing internationalisation will create a fresh dynamic.

Predictions for the first half of the year see many companies restructuring. As the stronger companies survive, investment trends will become more obvious. It will be easier to spot opportunities for the funds that have money to invest. Looking at the situation from this perspective, Delatte states that NeSBIC is in a good position to invest, following the closing of its NeSBIC Investment fund II (NIFII) last year.

Fund raising

Following a first closing at euro75 million, at the end of last year NIFII successfully reached its target of euro120 million.

NIFII is targeting deals mainly in the Benelux region and its neighbouring countries and is investing in non-quoted mid to later stage companies. Average size of investments range from between £2 million and £12 million. The fund is aiming to make around 15 investments in total.

Over half of the fund has already been invested in the Netherlands and Belgium in the following eight companies: Swets & Zeitlinger, Nimox, Stronghold Paper Group, Boekhandels Groep Nederland, Scana-Noliko, Netagco, Fair and Refresco.

A significant exit for the company’s first fund was SNT, an independent contact centre that listed on the Amsterdam Stock Exchange in March and has been trading substantially above its IPO price.

In December, a group of investors, amongst them, NIF II, NeSBIC Special Partnerships Fund and NIB Capital, led by H2 Equity Partners, acquired a majority stake in a Dutch-based newly formed company leading in the furniture rental services business. The company has a strong position in the Benelux and Germany is well-positioned to execute a buy and build strategy in the fragmented North-West European market. NIFII and the above mentioned group of investors will assist in and have committed to fund further autonomous growth and pan-European acquisitions.

Focusing on international expansion, the Amsterdam-based pan-European accelerator, GorillaPark at the end of the year started business operations France, with Jean-Emmanuel Rodocanachi heading up the Paris office. This followed the company’s completion of its $40 million second round of funding. Joining Cable & Wirless’ original investment of $20 million, Initiative-IP put in between $7.5 million and $8 million. Other investors in the round included ABN AMRO, Crescendo Ventures, Deutsche Bank, NeSBIC Group and Radobank Nederland.

Buyout focus

Buyouts for the year to date reached 41, an increase on the 28 deals for the same period of the previous year, according to Thomson Financial Securities Data. Total transaction value this year was $1,879.3 million, excluding 27 of the deals which did not disclose a deal value.

Among the buyouts boosting this figure was the acquisition in November of Center Parcs NV, the Rotterdam-based operator of 13 holiday villages. An investor group comprising Pierre & Vacances (PV) of France and DB Capital Partners (DBCP) of Germany agreed to acquire the entire outstanding stock of the company from Scottish & Newcastle Breweries (SNB) of the UK for a total cash consideration of euro1.12 billion.

This month, an investor group comprised of the management and employees of Holland Railconsult BV and NPM Capital NV, acquired HR, Utrecht-based rail engineering consultancy company from State-owned Nederlandse Spoorwegen NV, for an estimated 140 million Dutch Guilders.

A management-led investor group backed by UBS Capital BV acquired Heiploeg Shellfish International BV, Zoutkamp-based seafood trader, for a total consideration ofeuro260 million in a leveraged buyout transaction. The consideration consisted of euro60 million in cash and euro200 million in assumed liabilities.

UBS Capital BV (UBS), a unit of UBS AG of Switzerland, acquired Welzorg, manufacturer of healthcare equipment, for euro150 million. UBS acquired a 39% minority stake from Parcom Ventures, a further 39% minority stake from Alpinvest Holding NV, and a 15% minority stake from Residentie Participaties.

At the beginning of last year, Gilde Investment Management BV, a unit of Rabobank, acquired an 83.2% interest, or 10,959,427 ordinary shares, in Norit NV, manufacturer of activated carbon, via a tender offer to acquire the entire share capital. The offer was euro12 in cash per share, or a total value of euro131.5 million in an institutional/leveraged buyout transaction.