Valuation aspects when buying a business in the Netherlands

Valuation services (business appraisals) for companies in the Netherlands

How to value a company in the Netherlands? Valuing a company in the Netherlands is most often not to different from valuations in other countries. However, it is important to know some of the unique characteristics of most recent valuations in the Netherlands and especially in the industries where your company operates. We also touch upon some of the specific valuations or appraisal issues for M&A projects in Netherlands.

In which situations are business valuations useful or required?

There is a lot of situations where a valuation of company is required or at least important. In various types of conflicts it is crucial to perform a valuation. If you separate from your business partner, with whom you co-owned a company, general practice is to have an outside valuator do an appraisal (a valuation) of your company to know what the shares are worth. When people divorce and one of the partners is a business owner it is also important to have a valuation report that can be used to understand the value and hence to divide the assets of the married couple.
If you acquire a company it is important to know what similar companies in the Netherlands in the same industry have been valued at. In larger companies a valuation can be required when a company needs to perform an impairment. Other reasons to perform a valuation study can be a second opinion or a fairness opinion. In MBI or MBO cases or when minority shares in general need to be determined valuation reports are useful.

Background of valuation advisors in the Netherlands?

CFIE valuation partners in the Netherlands are all independent valuators. It is important that these valuators function fully independent so they can make objective valuations. They have gone through specific valuation studies (eg Master in Business Valuation) and gained their knowledge both in theory as well as in practice. Hence, they have the required theoretical knowledge to substantiate the valuation models made in practice.

What valuation models do CFIE advisors use?

CFIE valuation partners in the Netherlands provide valuations based on different type of valuation models. The type of models depend on what is required by each specific client. Some type of valuation models that are run, are a DCF (Discounted Cash Flow), comparable company analysis, precedent transaction multiples (eg EBITDA), asset or liquidation valuation and others. This all depends on the specific situation of a case.

Specific valuation issues for the Netherlands

Of course valuations are different in each country. It is always important to understand the risks, political situation and expected growth in a specific country. Further, it is good to know the historic valuations that have been performed locally. Valuation multiples or valuations in general differ mostly more between industry than between countries. We always work with local valuators from each specific country, in this case the Netherlands.

Business industry valuations in the Netherlands

In general the valuators we are in touch with in the Netherlands can perform valuations for all industries. However, we want to point out a few industries where our valuators have large experience. As we work often in the ICT and transportation industries these are industries we are very familiar with. We have good experience to valuate companies in these industries.

Business valuations of ICT and software companies in the Netherlands

When valuing a software company it is important to look at the recurring revenues coming from long term contracts. Valuation multiples get higher when a company has long term contracts with clients. Software companies very often have recurring revenues which are very attractive for buyers as in many cases the buyer is secured and will have future income.
In the ICT industry we see more and more companies moving to a cloud based model which often is combined with a billing model that has recurring revenues attached to it. The consequence is that we see the valuations of ICT companies increase once they start working with cloud based models. For more info on M&A in the ICT industry

Business valuations of forwarding and transportation companies in the Netherlands

On the one hand valuating a forwarding company in the Netherlands is a technical exercise. On the other hand one has to take the market situation into account where not to many independent forwarding companies remain available. The low availability of forwarding companies of course increases prices. However, the expectations of forwarding company business owners in the Netherlands are high. The profitability of some of the forwarders is pretty good, but we still see business owners overestimate the value of their company. The emotional side has to be taken into account when discussing a valuation with a business owner. However, in the end we have to be open and inform forwarding business owners that most buyers will not pay the price they have in mind. For more info on M&A in the transportation industry