Growth investor Mark van Ingen (Mentha Capital) and PwC’s Joris van de Kerkhof and Joost Storms provide an explanation.
2018 was a record year for investment in private equity and venture capital. Six billion euros was invested in Dutch companies. These are among the findings of a major survey carried out annually by the Netherlands Association of Investment Companies (NVP) in collaboration with PwC and the European sector associations of investment companies. PwC’s Joris van de Kerkhof and Joost Storms were closely involved in preparing the study report. Together with growth investor Mark van Ingen (Mentha Capital) they provide an explanation.
Joris van de Kerkhof (links) and Joost Storms - PwC
“If you’d asked me at the beginning of 2018 what kind of year it would be,” says Mark van Ingen, “I’d probably have expressed my doubts. There were various reasons not to have too high expectations. The macroeconomic climate was worsening and the world was facing unpredictable situations politically. In addition, there’s been a growth curve in this segment for years now, so you start to wonder how long it’s going to last. The NVP survey shows that investors continued to come on the scene in 2018 and investment continued to grow. In fact, it turned into a record year. I found that surprising. But actually I see that development continuing in 2019. It looks like we’re in a phase of long-term growth.”
Joost Storms: "The NVP report mainly works because almost all private equity and venture capital parties that are active in the Netherlands cooperate in it and supply data. This makes it the only complete study that identifies the right trends and shows in which sectors, growth phases and regions investment companies are active. In this way, it contributes to transparency in the sector. In short, the research is indispensable for a precise and objective picture of the entire sector. It shows that it is a healthy and solid industry that plays an important role in allocating capital and facilitating economic growth in our country."
Joost Storms, merger- and acquisitionspecialist at PwC
Joris van de Kerkhof: “In addition to the continued growth in overall investment, I find it remarkable that there is investment in more and more companies. Investors are interested in companies at virtually every phase of development, both starters and more established companies that are undergoing restructuring or seeking growth capital. Family businesses that are in the process of handing over to a younger generation are also in great demand. And new private equity parties are also moving in, including from abroad, looking for interesting Dutch companies to invest in.”
Joost Storms adds: “The market is becoming broader. It used to be that investors mainly sought out larger and established enterprises but now they are also more frequently interested in young, rapidly growing Dutch companies. Almost 300 such companies received investment from domestic or foreign venture capital parties.”
“From the perspective of the company,” says Joris van de Kerkhof “it means that if you have a good business plan and a good team, you have a real chance of finding capital to help you grow your business or start a new one. And as a company you therefore don’t just attract capital but also expertise, operational knowhow, and experience. Private equity investors are different because they think along with the companies they invest in. They want to be closely involved, and in that way they add some real value.”
Joris van de Kerkhof, partner and merger- and acquisitionspecialist at PwC
Growth-investor Mark van Ingen - Mentha Capital
Mark van Ingen: “It means that sellers have greater negotiating power and can stipulate higher prices. In 2018, that was clearly reflected in the rising valuation of companies. In the second half of the year, it led to a slight slowdown in sales compared to the first half. The number of companies actually sold decreased somewhat and the selling process generally took a little longer. I found that a striking development. Buyers were obviously being a bit more cautious. That wasn’t only due to high valuations but also to uncertainty about macroeconomic conditions. That feeling was also reflected in a correction on the stock exchanges at the end of 2018 and the beginning of 2019. That has in fact recovered and growth in the purchase and sale of companies is continuing.”
Joost Storms: “Financial technology, IT and life sciences such as biotech are succeeding in doing so. Those sectors have matured. In recent years they’ve have proven themselves and investors have little hesitation in investing in such companies.”
Joris van de Kerkhof: “Investors are interested in returns and they look around for where they can find those returns, not just in the Netherlands but in other countries too. Choosing private equity and venture capital is based on the level of return. This is better than on the stock exchange, despite the fact that it has become more expensive over the past year to acquire a stake in companies. The fact that the Netherlands and Dutch companies are attractive is primarily due to the companies themselves, their management, and their performance. The openness and accessibility of our economy also play a role. Dutch entrepreneurs have an international attitude, are approachable, and speak English. This makes them attractive business partners for international parties. Things are a bit different in countries like France and Germany.”
"The fact that the Netherlands and Dutch companies are attractive is primarily due to the companies themselves, their management, and their performance. The openness and accessibility of our economy also play a role."
Mark van Ingen: “I wouldn’t be surprised if last year’s trends continue. I’ve been positively surprised by developments so far. At Mentha Capital, we invest mainly in companies that have demonstrated their worth and that want to grow fast. I still see many such companies coming onto the market – strong companies with healthy cash flows and attractive growth prospects that can demonstrate why that growth will continue for some time to come.”
Joost Storms: “Based on the NVP report and my experiences, I expect private equity and venture capital to become even more important for the dynamics of Dutch business in the years ahead. A total of six billion was invested last year, the highest amount in the past ten years. The sector has grown for the sixth year in a row, which shows that we can’t do without this kind of investment. Without private equity and venture capital it’s difficult for many companies to develop.”
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