Private equity has an active history in Europe, and despite increasing legislation restricting investment activity, it has remained a key part of the financial landscape across the region. Recent reports, however, indicate that the industry may be facing greater restriction in the Netherlands, with the announcement that the Dutch Labour Party is in the process of drafting legislation to regulate the leverage levels of buyout transactions in the country. Should this be accepted into law, the ease of conducting such business in the country could be compromised, potentially impacting upon investor appetite for opportunities based in the Netherlands.
Preqin’s Funds in Market online service currently tracks 34 private equity vehicles in market targeting opportunities in the Netherlands as part of a wider geographic focus, seeking to raise €13bn collectively. This figure includes six buyout vehicles that are targeting an aggregate €5bn. The largest of these buyout funds is KKR Europe Fund IV, which is looking to raise €3bn and will focus on opportunities across West Europe, including the Nordic region, in a diverse range of industries. It may be the case that, should this legislation come into effect, funds such as these may be less likely to consider opportunities in the Netherlands.
The amount of capital raised each year by private equity vehicles including the Netherlands in their geographic focus has rebounded since the recession, with €6.1bn already raised via nine fund final closes in 2015 so far. Though 2013 saw 29 vehicles close with aggregate capital commitments of €19bn (the highest levels seen in the period from 2005), the year may have been anomalous; 2013 saw six vehicles that include the Netherlands as part of a wider geographic focus close above €1bn, and together these funds raised €14bn of the total capital. Levels for subsequent years have remained buoyant but have not approached the highs of 2013.
As demonstrated in the chart above, average fund size has also continued its upward trend, rising from just €270mn in 2010 to €762mn in 2015 YTD. The largest vehicle to close so far in 2015 that includes a focus on the Netherlands is PAI Europe VI, a buyout vehicle focusing on opportunities across Western Europe. The fund will target opportunities in the technology, healthcare, consumer products & services and environmental services sectors, among others, and has succeeded in raising €3.3bn, above its €3bn target size.
Though there is still uncertainty with regards to the scope and reach of the legislation currently being drafted, private equity investors with interest in the region are unlikely to react positively to the news. The clash of interests and agendas between legislators and actors in the financial industry is well documented, with both seeking to pursue what, in their view, is most beneficial for the industry as a whole and for the wider economy. Such tensions are common in other countries too, and it will be interesting to watch the passage of the proposed legislation and the subsequent reaction from those active within the Dutch private equity industry.