• Acquisition prices in Belgium reach absolute record heights

Acquisition prices in Belgium reach absolute record heights

08 June 2018

The Belgian mergers and acquisitions market gradually seems to be reaching its peak. It is not just the number of transactions but also the selling prices which rose for the fifth year in a row in 2017. The highest valuations are found in the real estate sector followed by pharmaceuticals, technology and healthcare. The demand is greater than the supply and competition is increasing. In addition, more and more foreign players are showing an interest in Belgian companies. In view of the anticipated further growth in 2018, there is a danger of overheating (i.e. the profitability will no longer be in proportion to the risks of the acquisition). Finally, the significant increase in debt financing and drop in the equity stake in a transaction are also striking.

These are the main conclusions of the M&A Monitor, an annual survey which involves over 150 Belgian mergers and acquisitions experts and advisers, including private equity investors, brokers, bankers, lawyers and corporate finance advisers. The study examines their experiences on the M&A market and deals in which they were involved in 2017 on the one hand and their expectations for this year on the other. The study was carried out by professor Mathieu Luypaert and researcher Gianni Spolverato from the Centre for Mergers, Acquisitions & Buyouts at Vlerick Business School in collaboration with Bank J.Van Breda & Co, BDO, Gimv and NautaDutilh.

Belgian mergers and acquisitions market on the rise for five years in a row

  • 81% noted an increase in the number of M&A transactions in 2017, and the majority even specified an increase of over 10%.
  • The level of interest from abroad is also rising: 67% saw an increase in the number of Belgian companies acquired by foreign players.
  • When asked about the driving forces behind the economic bubble on the market, the respondents mainly mentioned the available cash (both among private equity players and corporates) and economic confidence. As the demand is greater than the supply, the market is driven by the selling side.
  • Although they expressed concern about the market overheating, 2 out of 3 respondents expected to see another increase in 2018; only 25% expect the market to stabilise.
  • The respondents tended to be rather negative about the reform measures in the summer agreement: they felt that only the reduction in corporate tax and fiscal consolidation could serve to boost the mergers and acquisitions market.


The acquisition prices also rose for the fifth year in a row, across all sectors.

  • Whereas an average of 5 times the EBITDA value (i.e. the operational cash flow) was paid for an acquisition in 2013, in 2017 this figure reached 6.7.
  • Another striking development in 2017 is a price increase in the smaller deals segment (> 5 million euros); for the first time, we are reaching an average of 5 times the EBITDA here.
  • In the segment above 100 million euros, companies are being sold for an average of 8.8 times the EBITDA.

“In times of economic recovery and easy access to cheap finance, the increase in acquisition prices does not come as a surprise,” says Professor Mathieu Luypaert. “However, the question is when the limit has been reached. A sale at 6.7 times the EBITDA translates into an anticipated return on investment of around 15%. If the prices continue to rise, we will reach a situation in which the return on investment is no longer in proportion to the risk taken. Hopefully, both strategic and financial buyers will realise this.” 

For the first time, the M&A Monitor also distinguishes between the acquisition prices in each sector.

  • The highest valuations are found in the technological and healthcare sectors (both 8.2) and pharmaceuticals (9.2), with real estate leading the way (9.3).
  • Relatively speaking, the prices are lower in retail (5.3), transport and logistics (5.7) and the construction sector (6). These sectors are characterised by slow growth and heavy investments in assets.

“A high valuation is not just connected with the size of the company but may also stem from the strong growth potential of the company in question. The sensitivity to risk in the sector in which the company operates – the risk is very low with real estate – also affects the acquisition price. The fact that we now also have details for specific sectors increases the practical relevance of this study when it comes to determining price expectations,” says Mathieu Luypaert.

How are acquisition transactions financed?

  • Another striking development in 2017 is the significant increase in debt financing across all sectors and deal segments; banks therefore feel quite confident about the profitability of acquisitions.
  • The average proportion of equity financing in a transaction dropped from 33% in 2016 to 21% in 2017.

What drives buyers in their search for acquisitions?

  • Top 3 for strategic buyers: 1/ economies of scale, 2/ access to new technologies/markets, 3/ cross-selling
  • Top 3 for financial buyers: 1/ improving turnover, 2/ buy-and-build, 3/ improving margins

How does the deal process take place?

  • In 2017, the initiative was more frequently taken by the seller (69% of the deals vs. 63%).
  • 50% of the transactions which were initiated by the seller took place by means of an auction (43% in 2016); another striking phenomenon is that more smaller companies are being sold by auction. “This is mainly due to the high level of competition and the growing number of family businesses which are using auctions.
  • In 2017, an average of 5 parties made a bid per target company for sale
  • On average, an acquisition process took 6 months from the initial contact to the completion of the deal; 49% (versus 43% in 2016) specified that it took longer than 6 months.