Do you have a good and fast growing company in the Netherlands with liquidity (cash) issues to grow further ?
In this article we try to explain you what a Private Equity investment is and how it can help your company. We have good contacts to Private Equity in the Netherlands and can help you to find the right Private Equity buyer locally. We know which specific type of companies each Private Equity buyer looks for. We know how to write the Business Plan so it fits the requirements of a Private Equity investor. We can help you to determine if this type of investment can be useful for your company. We explain about the background and interests of PE investors and their specific requirements in the Netherlands. The strength of the Corporate Finance in Europe team is the combination of in depth knowledge of Private Equity requirements in the Netherlands combined with strong industry skills and speaking the local language.
Firstly, your company needs to be a good company and have a market leading position (or be able to achieve this) in its market. You need to be in a need for funding to grow the value of the company further. Your company needs to be unique as PE investors get a lot of requests and invests on average only in one of each 80 requests they get. Further, a Private Equity investor will only invest in the very best companies. There are different types of private equity investors investing in companies with only 20 employees up to a few thousands. Revenues can go from 5M Euro up to various hundreds of millions Euro or more. The private equity investors we are in touch with invest mostly in companies with revenues up to 200m Euro.
What different types of private equity transactions occur in the Netherlands?
Private equity transactions in Netherlands usually involve buyouts. On the Dutch market, private equity capital is primarily used by companies that do well and need capital to grow. However, sometimes Private Equity can also be open for companies facing financial distress (but are operationally viable) and unable to do profitable investments due to lack of adequate financial resources. Mostly private equity capital is utilised in the Netherlands to develop the existing business of a target. Further, we see cases where entrepreneurs wishing to exit the companies are replaced by existing management teams. The owner leaves the company it has incorporated or take some ‘chips of the table’.
Private Equity investors sometimes do have industry preferences, but in general are pretty much open to most industries. We know the industry preference of most of the Private Equity investors are interested in. Mostly investors look at the management and the growth opportunities of individual companies. Some industries of specific interest in the Netherlands for private Equity are ICT or internet, healthcare, business or financials services but also manufacturing.
It is important to get good legal advice when selling to Private Equity parties. This obviously also applies to transactions in the Netherlands. PE investors are interested in a good relationship with the management of the companies they invest in as they need to increase the value together. Hence, they depend somehow on the management for the future of the company. A lot of legal items will be relevant. PE investors can create transfer restrictions on shares through shareholder agreements so both parties are as certain as possible about the long term cooperation. Tag-along and drag-along rights, and rights of first refusal are granted to limit transferability but also to enable a sale when the opportunity arises.
A private equity investor is a financial investor that is interested in financial returns and hence has an exit strategy at the moment of acquiring shares. He or she normally doesn’t want to stay invested in a company for ever. In general these investors want to exit between 5 and 7 years, but this period can also be longer. If the right strategic buyer comes by a sale might happen earlier.
Private Equity companies have the alternatives to sell their stake in a portfolio company or conduct an IPO for its portfolio company. A sale very often happens to a domestic or international strategic party which is from the same industry. Alternatively the company can also be sold to another private equity firm.