By Suzy Bibko, Content Marketing Manager, EMEA
The Benelux (Belgium, the Netherlands, Luxembourg) region has been hard hit by the current pandemic, with Belgium recording one of the highest death rates in Europe and M&A recording its lowest quarterly value since 2014. But, according to Mergermarket data, cross-border transactions from China and the US have been providing a boost, with 153 transaction worth around €4.4bn in Q1. Can the region bounce back to its strong 2019 levels? What will drive recovery? And can technology provide a helping hand? At our recent Deal Drivers: Benelux webinar, in partnership with Mergermarket and moderated by Charlie Taylor-Kroll, we asked the audience and experts Eric Wijs, Dominique Maes, Alexandrine Armstrong-Cerfontaine, and Jerome Pottier for their thoughts.
Optimistic about recovery
It may still be a bit early to tell what will happen in terms of M&A, but as things are slowly starting to open up in the region and return to ‘normal’, we are seeing a bit of optimism. And it is this optimism that seems likely to help drive M&A market recovery in Benelux.
“Optimism is understanding that there is some sort of stability in the outlook,” say Wijs. “That is clearly the most important driver. We do expect a lot from restructuring, but I don’t think that will be the most important driver for M&A.”
That stability is starting to appear in the region. “The deals that may have been stopped or been delayed are starting to come back to the table,” explain Maes. “Auctions that were in the starting blocks before COVID may now be coming back. IPOs and capital raising are starting to make the news. And PE is ready to spend and be a booster to the market as well.”
"Since late May and early June we’ve seen an uptick back to more normal levels. So we are optimistic about market recovery."
–Jerome Pottier, Head of Western Europe, Datasite
Pottier agrees. “In January and February, Benelux was growing 30% yoy, while EMEA was growing only 20%, in terms of the number of new data rooms created. Admittedly, it started to stagnate in March, and in April and May we saw a 20% decrease in terms of data rooms created but that was in a traditional M&A use case. At the same time we saw an increase in the restructuring use case. However, since late May and early June we’ve seen an uptick back to more normal levels. So we are optimistic about market recovery."
"We’ve also seen the number of data room closures remain level," explains Pottier. "During the crisis it could have decreased significantly with clients shutting down their data rooms due to deals being off the table, but it’s remained very stable. This shows that our clients are very hopeful that they will be closing their deals in Q3 or Q4.”
Rebalancing with restructuring
Unfortunately, optimism alone may not help everyone affected by the pandemic. Many companies have had to use some method of restructuring to survive. The good news is that divestitures and carve-outs look to dominate, rather than liquidations.
Armstrong-Cerfontaine agrees. “I see a likely increase in secondary sales to investors, rather than defaulting. The secondary market is much larger and much more developed than in 2008 and 2009, so I would expect defaults to be much rarer than then.”
“I think we will see some spin-offs, with companies being forced to concentrate on their core businesses,” says Maes.
Tackling it with tech
The pandemic has demonstrated and reinforced the need for technology that allows practitioners to do deals wherever they are. It's no surprise that most dealmakers feel that the most important aspect of technology for getting deals done is the capability to complete due diligence virtually. The pandemic may have slowed things down, but it’s also proven how resilient and resourceful people and companies can be.
“The pandemic has changed the way deals are executed,” stresses Pottier. “But Datasite’s strategy is to help clients work better and more efficiently while working remotely, in order to make things possible that previously were not, like redacting documents while you’re at home, managing your deal marketing stages and collecting documents thanks to our AI smart categorization engine. Datasite will keep investing to serve our clients better and meet their needs.”