According to a recent article in Het Financieel Dagblad (FD), private equity has a significant interest in medium-sized enterprises. In the Netherlands, investment firms primarily focus on companies with revenues between €10 million and €50 million, with individual investments typically going up to €20 million per company. Research also indicates that private equity firms are increasingly interested in the IT, pharmaceutical, medical, and industrial sectors. For example, currently 28% of Dutch private equity is active in the IT sector.
This trend has grown significantly in recent years as private equity funds actively seek investments in these sectors. Medium-sized enterprises are attractive to private equity investors due to their growth potential, stable cash flows, and the opportunity to create value through operational improvements and strategic acquisitions. private equity funds have substantial cash reserves that they need to deploy to achieve the required returns.
Due to macroeconomic issues such as sustainability, digitalization, and labor shortages, consolidation was expected to unlock untapped value. This is especially true in labor-intensive business services and sectors dependent on energy and raw materials, such as the industrial sector. With fewer available resources in the market, it was anticipated that some private equity funds might consider SMEs sooner than before. The data seems to support this. Read more about Blenheim’s expectations for the M&A market in our review of 2023 and outlook for 2024.
What is Private Equity?
Private equity investments involve the capital provided by private equity funds to non-publicly traded companies. This capital is used to purchase, restructure, or expand businesses. The investment horizon for private equity funds is typically five to seven years, after which they sell their stake, often with a substantial profit.
Blenheim’s Role in Private Equity Investments
Private equity plays a crucial role in the growth and development of medium-sized enterprises. With the right guidance and expertise, these investments can create significant value for both investors and the companies themselves. Blenheim is ready to assist you at every step of your private equity investment journey. Want to know more about business acquisitions and the position of private equity as an investing/acquiring party? Check out our blog Help, there’s an investor at the door! What to do when private equity comes knocking.
For more information on how we can support you with your private equity investments, contact us today. The specialists at Blenheim are here to help.