Dutch M&A market appears poised for growth

'As we look ahead to 2025, the global M&A market appears to be on the verge of a recovery, encouraging increased activity and investment,' says Remco van Daal, PwC Deals leader. 'The improving economic conditions are expected to have a positive impact on M&A. This global perspective aligns with the trends we observe in the Netherlands.'

Just like in the years immediately following the COVID-19 crisis, deal volumes declined by twenty percent last year, although they remained higher than pre-pandemic levels. Van Daal: 'In the second half of last year, there were some high-value transactions, particularly in the energy and financial sectors but volumes continued to decrease. Several key drivers, such as geopolitical dynamics and the current capital market, are becoming increasingly prominent and are expected to shape the deal market in 2025. Companies are increasingly focusing on growth and transformation to remain competitive in a rapidly changing landscape. This trend is clearly visible in the Netherlands.'

In the Dutch market, private equity is expected to stimulate and dominate mid-market M&A. With abundant capital, increasing exit pressure, and a search for returns, there will be more assets available, including private equity portfolio companies and non-core corporate assets.

Moreover, the improving economic conditions are likely to create a favourable environment for M&A, making it easier for companies to secure financing and execute transactions, further driving market growth.

The following factors will shape M&A activity in the Dutch market in 2025, each presenting unique challenges and opportunities for companies:

Interest rates: Developments in interest rates will influence dealmaking. Rising long-term rates can hinder returns and refinancing, while lower borrowing costs might be beneficial for private equity firms compared to strategic buyers. This provides companies with the opportunity to access capital more easily, refinance existing debt, invest in new projects, and pursue growth through strategic acquisitions.

Geopolitical dynamics: Geopolitical tensions, particularly those arising from conflicts in the Middle East and Ukraine, and the import tariffs introduced by President Trump, continue to create significant uncertainties. These dynamics have a crucial impact on the M&A landscape. Shifts in trade policy and tariffs can influence inflation and, consequently, the number of mergers and acquisitions in various sectors. Companies with international supply chains need to navigate these complexities carefully. These tensions can halt dealmaking to mitigate risks or serve as catalysts for new deals.

Conversely, companies can leverage these geopolitical dynamics to explore international markets, form strategic alliances, and diversify their portfolios. This creates opportunities to enter new regions, tap into emerging markets, and benefit from increased global trade and investment flows.

Energy transition: The increasing shift towards renewable energy and sustainability will be a significant driver of M&A activity in the energy sector. Companies will actively seek investments in technologies and projects that support the transition to a carbon-free economy. This presents opportunities for companies to innovate, develop sustainable solutions, and position themselves as leaders in the green economy. Investments in renewable energy, energy storage, and carbon capture technologies can drive long-term growth and create new revenue streams.

Technological innovation: The rise of AI and digital transformation will continue to be a major driver of M&A activity. Companies will seek technological capabilities to enhance their operations and maintain a competitive edge. This creates opportunities for companies to invest in advanced technologies, improve operational efficiency, and offer innovative products and services. By embracing digital transformation, companies can stay ahead of industry trends, meet changing customer needs, and drive value creation.

Regulatory changes: Changes in regulatory frameworks, particularly in the financial services and energy sectors, will play a crucial role in influencing M&A activity. Companies need to be prepared for these changes to capitalise on new opportunities and ensure compliance. This presents opportunities for companies to engage with regulators, shape policy developments, and gain a competitive advantage. By staying informed and proactive, companies can mitigate risks, seize new market opportunities, and strengthen their strategic position.

The following subsectors are poised for increased M&A activity in 2025:

Consumer health and beauty

The growing demand for health solutions and sustainable beauty and personal care products, driven by an ageing population and changing consumer behaviour, will lead to more acquisitions in the consumer markets. Companies offering sports nutrition, natural, and plant-based ingredients are particularly attractive targets. Those that adapt to evolving consumer trends are likely to be the most successful.

Food and beverage 

Companies involved in the production and sale of non-durable goods, known as fast-moving consumer goods (FMCG), will continue to optimise their portfolios. This will drive more M&A activity in this sector. The sector is attractive due to stable market demand and will see further portfolio optimisation and consolidation. This provides opportunities for smaller players and private equity firms. Innovative and sustainable products, such as non-animal ingredients and eco-friendly options that align with changing consumer preferences, make this sector particularly attractive.

Energy

The energy transition will continue to drive M&A activity, with financial investors increasingly involved in transactions related to renewable energy, biofuels, and biogas/methane projects. While 2024 saw a reasonable level of energy deals, including increased activity in previously quiet sectors like chemicals, the anticipated growth in the Netherlands has not yet fully materialised.

Financial services 

Further consolidation is expected in the financial services sector, particularly in the insurance brokerage and asset management subsectors. This consolidation is driven by strategic and private equity parties, regulatory changes, and the need for technological innovation. Companies in the asset management sector will engage in M&A activities to expand their market presence and improve their capabilities.

Technology

The activities in the IT services and software market are likely to continue growing, with significant interest in companies involved in AI, cybersecurity, and cloud services.

Private equity (PE) continues to play a significant role in the Dutch M&A market. After a peak in the first half of 2023, PE's share in deals stabilised at an average of 44 percent in 2024. This stabilisation reflects a cautious approach, with PE firms focusing more on exiting investments than on making new ones.

The holding period for PE-portfolio companies has increased, partly due to a lack of buyers or waiting for better market conditions. In addition to pressure from limited partners (LPs), the need for PE firms to divest has increased.

The Dutch M&A market is expected to benefit this year from more stable interest rates and abundant capital. Van Daal: 'This strengthens investor sentiment and increases capital deployment. PE firms are likely to continue playing a crucial role, especially in sectors such as IT, software, and the energy transition. By leveraging their capital reserves, they can target growth in these specific sectors. The focus on innovation, sustainability, and strategic adaptation will lead to significant M&A activity, with PE firms well-positioned to capitalise on these trends.'