Investors see opportunities through new growth opportunities in Dutch business. Their role is a more active one than a few years ago, when returns through growth were still easy to achieve. This is according to an analysis by Fambizz, which releases the Fambizz Investor Top 15.
“The trend of increasing investments in Dutch companies by private equity firms in 2013 will continue in 2014.” This is according to Tjarda Molenaar, director of the Dutch Association of Venture Capital Companies (NVP). Last year, these investors put a total of 2.4 billion euros into Dutch businesses, which at the time was an increase of one billion euros compared to the investment sum in 2012.
The natural operating area of private equity firms, medium-sized companies and startups, accounts for 85 percent of these investments. “There it concerns companies with less than 100 employees and a turnover of less than 10 million euros. Investments in this group of companies range from half a million to about five million euros, with bank financing sometimes added on top of that.”
Game has changed
The recovering economy is driving the growing investments in business, but this does not mean that after a few lean years it is business as usual again. The game has indeed changed. Sees also Maarten Vijverberg, partner at BoerCroon Corporate Finance. “In the ‘old days’, before the crisis, investment companies were mainly focused on acquiring a majority in a company, with the aim of exiting within a period of three to five years. You create returns through growth, and that very element is difficult.”
Private equity parties are increasingly using their knowledge and expertise to work with management to help a company flourish. “There are not endless companies for sale that make high returns, so they also look for opportunities to create returns without a majority and look at growth together with the entrepreneur.” Vijverberg hastens to add that this is a fledgling trend. “It has a lot to do with the fact that only now the confidence is there to invest in growing a business again.”
Interested in family businesses
More than ever, private equity firms are interested in family businesses. “There is a whole family business hype that wasn’t there seven years ago,” Vijverberg knows. “Because of less bank financing and better solvency, they have proved particularly crisis-proof. They also often operate in special niche markets with opportunities for growth.” Still, the combination of family business and private equity is not always a happy one. The family wants to retain as much control as possible and is opposed to raising “other” funds. “With first- or second-generation directors, there are often still opportunities. They also often do not see their company as a family business and it is then easier for outsiders to invest and participate in the business.”
Wish lists
As an entrepreneur, how do you find the investor who will really help your business move forward? “It starts, of course, by creating a plan to back up the investment,” Vijverberg said. “Approaching financiers indiscriminately is probably not a good idea. Better to join a party that has select criteria. Many private