NETHERLANDS Trends and Developments Contributed by: Gianluca Kreuze, Ruben den Hollander, Anne van Geen and Sanne van Esterik, Loyens & Loeff
In 2024, the Dutch acquisition finance market continued to navigate challenges as the macro- economic landscape evolved. While inflationary pressures eased compared to 2023, the effects of previous interest-rate hikes were still notice- able, influencing investor sentiment, credit avail- ability and overall market activity. The anticipat- ed rate cuts by the European Central Bank (ECB) materialised in the second half of the year and provided some relief, but uncertainties endured due to global economic headwinds and geopo- litical tensions. Despite hopes for a recovery, larger transactions and high-yield bond issu- ance remained subdued, with investors main- taining a cautious approach. The general pri- vate equity transaction market showed some improvement, particularly in the mid-sized and smaller segments, but overall activity remained below pre-pandemic levels. Market participants adapted to the new market and ongoing chal- lenges by adopting alternative debt structures and private credit solutions. While activity picked up in 2024, overall deal volume remained below initial expectations. Macroeconomic Backdrop The Dutch economy showed signs of recov- ery in 2024, with real GDP growth projected at 0.9% after two years of stagnation. This upturn was supported by increased public spending and private consumption – driven by significant wage increases exceeding 6% almost entirely offsetting inflation, and a persistently tight labour market – although investment growth remained subdued due to earlier financial tightening. As an economy heavily reliant on international trade, the Netherlands remained vulnerable to international market fluctuations. Key macroeco- nomic trends that shaped the Dutch acquisition finance market in 2024 included the following.
• Inflation moderation – the aggressive rate hikes by the ECB in 2022 and 2023 began to show results, with inflation in the Euro- zone slowing. In the Netherlands, inflation decreased to average 3.2% for the year, down from 4.2% in 2023, based on the Har- monised Index of Consumer Prices. • Interest-rate developments – the ECB sig- nalled a shift in policy, implementing gradual rate cuts starting in mid-2024, reducing the deposit facility rate from 4.00% to 2.50% currently. While this stimulated borrowing and investment, the pace and extent of the cuts were sufficient to balance economic growth and inflation control. • Economic pressure – the feared recession of 2023 did not materialise, as the labour market remained robust, household spending con- tinued – remaining a key driver of economic activity – and businesses adapted to higher financing costs. However, business invest- ment, including M&A, remained weak due to relatively high borrowing costs compared to earlier years. Market participants were cautious, leading to deals falling through, not being completed or experiencing long lead times. Investors continued to prioritise immediate profitability through cost-cutting measures over long-term growth strategies. Additionally, private equity funds continued to hold large amounts of capital, waiting for more favourable market conditions before deploying their investments. In addition, despite some stabilisation, the “val- ue gap” (the difference between what a seller expects and what a buyer is willing to pay) remained a challenge; economic uncertainty makes buyers more cautious, and more likely to reassess asset valuations, while sellers often expect prices to remain at pre-rate-hike levels.
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