The Netherlands is a country thriving at the lower and mid-market sectors of the private equity market . with the majority of investments in recent years being in small and medium-sized enterprises (SMEs).

In 2013 (the most recent year in which data is available) 90% of all private equity investments in the Netherlands were worth less than €5 million, with all investments (including those by venture capital firms) dropping from €1.4 billion in the previous year to €989 million (84% of which were in the Netherlands). In spite of this, 2013 saw an increase in the value of shares sold in portfolio companies; increasing from €881 million in 2012 to €1 billion in 2013.

The number of companies receiving investment is also increasing, despite a small dip in the amount invested. In 2013 €150 million was invested into 210 companies, whereas in 2012 these figures sat at €169 million into 190 companies.

In terms of raising funds, private equity and venture capital firms across the Netherlands raised a total of €768 million of new funds in 2013, down from the €1.3 billion raised in 2012. Despite these firms holding €29.82 billion of capital under management in 2013, fund raising has reached the lowest point the country has ever seen.

An attractive market for international investment

Despite this, the Netherlands is seen as an attractive market . The largest investments and deal activity in the Dutch economy in recent years have come from international investors looking to benefit from the Dutch banks’ unwillingness to participate in many larger deals, due to the favourable terms they’re currently receiving from the mid-market (see below).

In 2013 a total of 336 Dutch companies received €2.4 billion in investments from both domestic and foreign private equity and venture capital firms combined, an enormous increase on the previous year’s figure of €1.4 billion invested into 315 companies — with the majority of this increase coming from overseas investors making higher-level investments .

Mid-market deals

Despite receiving their fair share of foreign investment . when it comes to mid-market deals in the Netherlands the Dutch tend to keep themselves to themselves, with only a small number of private equity sponsors and leveraged finance bankers involved at the mid-market level.

Dutch banks relish in the opportunity to participate in these mid-market deals, as by providing leveraged financing they’re put in a relatively favourable position. At the mid-market level it’s difficult to play Dutch banks off against each other (something which tends to occur with regard to pricing, fees, and conditions for smaller deals). This puts banks in a position to make their own demands in terms of undergoing sophisticated, independent due diligence and requiring favourable legal terms. This, ultimately, limits the risk of all loans given out by Dutch banks.

It would be one-sided to not mention the increase in the total value of divestments in the Dutch private equity market in recent years. In 2013 €1 billion was divested from a total of 155 companies across the Netherlands (by both foreign and domestic firms), a 12% increase over the previous year.

Those looking to invest in the Dutch private equity market in the coming years, should find encouragement in the attitudes of international investors making large investments in the country’s private equity market, despite the temporary hesitancy coming from domestic firms.