NETHERLANDS: An Introduction to Corporate/M&A: High-end Capability

Introduction

The Netherlands continues to be a preferred destination for M&A, attracting global investors due to its stable economy, strategic location and business-friendly environment. Known for its highly developed infrastructure and innovative business climate, the Netherlands offers an ideal setting for M&A activities, providing numerous opportunities for growth and expansion.

The Dutch market is characterised by its openness to foreign investment, supported by transparent regulatory frameworks and favourable tax policies. This has positioned the Netherlands as a preferred location for multinational corporations seeking strategic acquisitions and partnerships. Moreover, the Netherlands’ skilled workforce and innovative culture further enhance its appeal as a prime location for M&A activities.

Trends in the Dutch M&A Market

Below, we highlight some noteworthy trends in the Dutch M&A market, derived from our daily practice.

Auction trends

In 2024, there was a notable increase in failed or aborted sell-side auction processes, driven by a perceived buyer’s market. Buyers have become less willing to comply with strict procedures or pay EBITDA multiples that no longer make sense given the current interest rate and geopolitical dynamics. Additionally, we observed several auction processes where one bidder, leading the pack, sought to expedite the deal with the sellers, reflecting the increased bargaining power buyers have gained heading into 2025. Despite these challenges, significant dry powder remains available in the market, which will need to start making a return. Fund managers are under continued pressure to deploy this available capital. This is likely to result in an increase of M&A activity in 2025.

Sector tends

From a sectoral perspective, the Dutch M&A market has seen continued consolidation in specific regulated markets, such as the insurance and banking sectors. Additionally, there have been high levels of M&A activity in the energy sector, infrastructure sector and the TMT sector.

An interesting consolidation trend has also emerged within the professional services industry, with mid-sized and small accounting firms being acquired by financial investors. Although regulators have expressed concerns, this trend is expected to continue. We expect that this consolidation trend will likely accelerate in 2025, starting with the announcement of Inflexion’s investment in Baker Tilly Netherlands in February 2025.

In the healthcare sector, a public debate regarding the role of private equity (PE) investors led to a review by a Big Four consultancy firm, assessing the quality, accessibility and affordability of care in healthcare institutions partially or fully owned by PE investors. The findings concluded that there were no significant differences between PE-owned healthcare institutions and those that are not. Currently, the Dutch House of Representatives is considering legislation aimed at improving transparency and integrity in healthcare providers, and the role of private equity in this context remains under scrutiny.

Fund/PE trends

In 2024, there continued to be significant activity at PE fund and PE fund manager level in the Dutch M&A market. This included the major acquisition of the Dutch fund manager DIF by global PE giant CVC, as well as growing interest in establishing so-called continuation funds. These continuation funds allow financial sponsors to hold on to one or more assets beyond the typical fund term

Continuation funds are a relatively new concept, and their significance is expected to increase in 2025, as it often makes more economic sense to maintain the growth momentum of well-performing portfolio companies rather than prematurely selling them to another investor or pursuing a public listing merely because the fund term is ending.

In 2024, buy-and-build strategies have driven higher transaction volumes, with valuations becoming more realistic. As of early 2025, M&A activity remains steady, and investors anticipate an increase in deal volume as the year progresses.

Regulatory Developments

Foreign direct investment (FDI)

The growing significance of European FDI regulations in M&A transactions reflects a global trend toward protecting national interests, ensuring economic stability, and navigating geopolitical dynamics. Strategic industries such as technology, infrastructure, defence, and healthcare are now often subject to (stringent) FDI regulations. Thorough due diligence is necessary to understand the regulatory environment across jurisdictions, ensure compliance and facilitate successful cross-border transactions.

Foreign subsidies regulation (FSR)

The European FSR, effective from 12 July 2023, is gaining importance in M&A transactions. The FSR aims to establish a harmonised framework to address distortions caused by foreign subsidies and ensure a level playing field. In M&A transactions, clients must assess how foreign subsidies could affect target companies and market competition. By factoring in FSR considerations during due diligence and deal structuring, clients can mitigate risks and secure regulatory approvals.

Environmental, social and governance (ESG)

ESG regulations are increasingly critical in M&A transactions, reflecting a broader shift toward sustainable and responsible business practices. Buyers must ensure that the target company complies with all relevant ESG regulations to avoid inheriting legal risks and potential liabilities. Companies that integrate ESG considerations into their M&A strategies can enhance compliance, meet stakeholder expectations, protect their reputation and manage risks effectively. In 2025, regional differences in the application of ESG are becoming more apparent, with the EU advancing ESG regulations, while the US experiences political tensions on the matter.

Digital Operational Resilience Act (DORA)

The European DORA, which came into force on 16 January 2023, applies as from 17 January 2025. DORA will have a significant impact on M&A transactions, particularly in the financial sector, by imposing stricter cybersecurity, risk management and third-party risk standards. Buyers will need to identify potential vulnerabilities in the target company’s cybersecurity measures and invest in necessary upgrades to meet DORA standards. DORA is, therefore, expected to have a high impact and will require significant efforts to ensure timely compliance by qualifying financial institutions, their counterparts and ICT third-party service providers.

Conclusion/Forward-Looking Statement

Despite ongoing market uncertainties, investors and corporations remain optimistic about M&A activity in 2025. Institutional investors, especially the largest US and EU pension funds, are significantly increasing their private equity allocations to meet their payment obligations and return expectations. This growing investor confidence will likely drive increased deal activity in the months and years ahead. In terms of deal execution, developments in European and Dutch legislation will be closely monitored in the coming months.