Belgian acquisitions market in lockdown due to Covid-19

Results of the 2020 M&A Monitor

Gianni Spolverato

By Gianni Spolverato

Doctoral Researcher, Accounting & Finance

Mathieu Luypaert

By Mathieu Luypaert

Professor of Corporate Finance

14 May 2020

The Belgian mergers and acquisitions market experienced a good and stable year in 2019, with slight growth in the smaller transactions segment. However, as a result of the Covid-19 pandemic, merger and acquisition activities are expected to decline by more than 30% in 2020. In addition, 60% of Belgian experts also expect a price drop of more than 10%. Liquidity problems in many companies could also cause the balance of power to shift, mainly putting buyers in a strong bargaining position. Finally, for the first time a question was asked about the expected impact of an acquisition on future employment. This impact appears to be positive across the board.


These are the main conclusions of the seventh edition of the M&A Monitor, an annual survey of around 110 Belgian merger and acquisition specialists including corporate finance advisers, private equity investors, brokers, bankers and lawyers.

The survey asks about their experiences in the M&A market and the deals they were involved in during 2019 on the one hand, and their expectations for 2020 on the other. In order to estimate these expectations correctly, an additional survey was sent out in the second half of March which specifically asked about the expected impact of the Covid-19 pandemic. The study was conducted by professor Mathieu Luypaert and researcher Gianni Spolverato of the Centre for Mergers, Acquisitions & Buyouts at Vlerick Business School in collaboration with Bank J.Van Breda & Co., BDONautaDutilh and Sowaccess.

Number of takeover deals stable in 2019

In comparison with the outstanding results in 2018, the Belgian mergers and acquisitions market was generally characterised by stabilisation in 2019. 40% of the respondents noted no significant increase in the number of transactions compared to 2018. Nevertheless, there are a number of divergent trends: 

  • 70% of the respondents saw the number of transactions in the smaller deals segment (less than 5 million euros) increase in 2019.
  • Furthermore, there was a declining trend in the average number of parties bidding on a target. There were 5 in 2017, an average of 4 in 2018 and 3 in 2019.
  • Finally, there was also a clear decrease in the number of foreign transactions: whereas in 2017 36% of all transactions by Belgian buyers were foreign, in 2019 this figure was only 1 in 5 (22%).

According to Professor Mathieu Luypaert, more protectionism is also evident at an international level: “Worldwide, the number of foreign transactions is falling below 25% this year. This is comparable to figures from previous crisis periods. Even without the coronavirus outbreak, trade wars and Brexit have therefore caused the acquisitions markets to become increasingly introspective.”

No major shifts in valuations

In 2019, an average of 6.5 times the EBITDA value (i.e. the operating cash flow) was paid for the acquisition of a company across all size segments. This is the same as in 2018.

  • For large transactions above 100 million euros, the average was 12.
  • For smaller transactions below 1 million euros, the average was 5.1.
  • In terms of sector, we continued to find the highest multiples in the pharmaceutical sector (9.4), the chemical sector (9.1) and the technology sector (8.9) in 2019. The lowest acquisition prices can be found in retail (5.8), logistics (5.6) and construction (4.8).

“Prices have been very stable across all segments for several years,” says Mathieu Luypaert. “Between 2013 and 2017 we saw a clear upwards trend, but then the peak was reached. However, the market did not collapse afterwards, but in fact stabilised.”

Covid-19 turning mergers and acquisitions market upside down

As a result of the lockdown in many countries, ongoing deals are currently mostly on hold and almost no new deals are being initiated. The respondents' expectations for the rest of 2020 also tend to be rather negative, both in terms of the number of transactions and the acquisition prices:

  • 58% of respondents expect a decrease of more than 30% in the number of acquisition transactions in 2020, for both domestic transactions and cross-border deals.

Mathieu Luypaert: “In the very short term, there are a number of practical issues: the ban on physical visits to companies complicates the negotiations, the due diligence process cannot be carried out properly, many of the regulatory authorities aren’t currently working normally, and so on. In the case of transactions that have already been signed, buyers are invoking special clauses in the contracts which make it possible to withdraw in extreme circumstances. But also in the longer term, it is mainly the economic impact of Covid-19 that could lead to a dip in the acquisitions market. When the economy is performing well and stock market prices are high, we tend to see more takeovers. Banks are also more inclined to provide finance. The longer the effects of coronavirus persist, the greater the likelihood of a negative effect on the acquisitions market.”

  • 60% of the respondents expect company valuations to decrease by more than 10%; 1 in 5 even expect a drop of more than 20% in the multiples.

“It is not only the multiple, which averaged 6.5 for 2019, but also the EBITDA value of the company itself which could fall as a result of Covid-19,” explains Mathieu Luypaert. “As a result, you have a double impact on prices. It is therefore becoming increasingly difficult to determine the correct price and this can lead to major discussions between the buyer and seller. After all, the results for the current year will be much more negative and do not reflect normal operating results. It is therefore important to determine to what extent the drop in EBITDA in 2020 is a structural or temporary effect.”

Going for a song?

In the long term, the Covid-19 pandemic will make it possible for buyers who still have cash to do good business. On the one hand, there is an expected drop in prices. On the other hand, attractive companies with valuable technologies may enter the market unexpectedly due to liquidity problems. In just a few months, there could be a shift from seller’s to buyer’s market, putting buyers in a strong bargaining position.

“Very large players in particular, especially in the pharmaceutical and tech industries, are less affected by Covid-19. They often still have sufficient cash outstanding and can now use this to acquire intangible knowledge cheaply. Many opportunities also exist for private equity companies. However, the greatest danger comes from abroad. Attention must be paid to prevent strategically important companies from being wholly or partially owned by funds from the Middle East or Asia, causing us to lose important decision-making centres or technologies.”

Impact on employment tends to be positive

Contrary to expectations, an acquisition does not automatically mean negative restructuring at the HR level: 38% of the respondents expect an increase in employment over the next 3 years for the acquisitions from 2019.

  • This applies to both strategic and financial buyers, as well as domestic or foreign buyers.
  • Only 11% of domestic transactions (and 17% of foreign transactions) are expected to have a negative effect on employment in the three years following the acquisition.

Mathieu Luypaert concludes: “This is good news in the light of a possible increase in unemployment as a result of the Covid-19 pandemic.”

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Mathieu Luypaert

Mathieu Luypaert

Professor Corporate Finance