Valuation gaps, economic headwinds, and financing hurdles shape Benelux M&A

Insights from our 2024/25 Benelux Trend Survey Report, developed in collaboration with MeNA, reveal three key challenges that could impact deal-making activities in 2024 and leading into 2025. The survey of 175 dealmakers found these key obstacles are valuation discrepancies, economic instability, and financing constraints.

Valuation disparities is a persistent challenge

One of the most significant challenges facing dealmakers in Benelux is the persistent gap between buyer and seller expectations. As Ida Kuijken from Fortino Capital notes, "This gap often emerges in initial discussions." This discrepancy is exacerbated by economic uncertainty, as sellers may be overly optimistic about future growth prospects, while buyers remain cautious due to market risks and potential challenges.

The issue is particularly pronounced in family businesses, where emotional factors can influence valuation decisions. As Sjoerd Peijster from Strukton Group points out, "Valuation differences remain a challenge, especially in family businesses where emotional value plays a role."

Economic uncertainty and market volatility

Economic instability and fluctuating market conditions are also casting a long shadow over the M&A landscape in Benelux.

When interviewed for the report, Richard Reis, Partner at Argos Wityu, identifies fluctuating market conditions as the foremost challenge, strongly remarking, “Economic instability affects everything else. It complicates financing, amplifies valuation discrepancies, and increases competition for quality deals. Geopolitical tensions and shifting trade policies only add to the uncertainty.”

Tom Snijckers, Partner at Oaklins Netherlands, echoed this sentiment, emphasizing the impact of geopolitical tensions on market dynamics. “While valuation gaps and financing issues are significant, they often stem from the broader economic instability”, he said.

Financing constraints are a major hurdle

Finally, securing financing remains a critical challenge for many dealmakers in the region according to the insights. Marco Gulpers from ING highlighted the complexity of the financing process, including due diligence requirements and fluctuating market conditions. The current economic climate, characterized by high inflation and stagnant interest rates, has led to increased reluctance among banks to provide acquisition financing.

Sjoerd Peijster underscores the impact of this trend, noting that "the current economic climate is impacting banks' willingness to finance acquisitions." This could significantly hinder deal activity, particularly for larger transactions.

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How to overcome these hurdles 

To combat these challenges, dealmakers featured in the report emphasized the need for their colleagues to adopt a strategic approach, including:

• Realistic valuations: Both buyers and sellers must adopt a pragmatic approach to valuation, taking into account economic realities and future growth prospects.
• Due diligence: Thorough due diligence is essential to identify potential risks and opportunities, especially in uncertain market conditions.
• Flexible financing strategies: Exploring alternative financing options, such as private equity or debt financing, can help mitigate the impact of traditional bank financing constraints.
• Strategic partnerships: Collaborating with strategic partners can provide access to additional resources and expertise, enhancing deal-making capabilities.
• Adaptability: Being able to adapt to changing market conditions is crucial. Dealmakers must be flexible and agile in their approach to M&A.

By understanding the key challenges and adopting effective strategies, dealmakers can increase their chances of success in the current turbulent world of M&A in Benelux.

The upcoming year presents a landscape fraught with challenges. To navigate these complexities, insights from industry experts like those found in the 2024/25 Benelux Trend Survey Report will be invaluable in developing effective strategies that drive successful transactions. Read the full report to unlock these insights and gain a deeper understanding of the Benelux M&A landscape.