The dealmakers in the Benelux are undeterred by the disappointing M&A results of the past year. A year ago, 'only' 55 percent expected an increase in deal volume. Now it is almost 78 percent.

Falling interest rates are always good news for the M&A market. “It leads to lower financing costs, which can make acquisitions more attractive”, as Sander Neeteson, Head of Corporate Finance at ABN AMRO Bank, says. “In addition, it contributes to a revival of the stock markets, which could lead to more transactions using shares as a means of payment.” All factors that strengthen his suspicion that the deal volume in the Benelux will increase slightly in the coming months.

“In addition, the situation can hardly get worse than it is now”, says Neeteson: at a certain point, recovery will occur naturally after a downturn. This is also what Hossein Araghi, Managing Director Benelux at IT company Lyvia Group, thinks about it: "We saw an all-time high in 2021 and 2022, followed by a decline in deal volume. Now we are starting to recover. I believe that a part of this is simply a return to the high levels of 2021 and 2022.”

However, most dealmakers interviewed based their optimism on falling interest rates. Marcel Vlaar, Financial Due Diligence Partner at accounting and consultancy organization RSM Netherlands, for example: "Inspired by falling interest rates and a growing economy, I am optimistic. I therefore expect a slight increase in the number of mergers and acquisitions in the Benelux next year." And Sergio Herrera, Managing Director M&A at Rabobank: "Central banks make interest rate adjustments downwards and that simply ensures that more cheaper financing and capital becomes available.”

Herrera also points to the economic recovery. Moreover, there is less concern about the (geo)political uncertainties that were a spoilsport for many deals last year. “This will be the first normal year after Covid and the Russian invasion of Ukraine. All Covid effects are now out of the economy, just like the impact the war in Ukraine has had. People then gain more confidence to do transactions. I think that two to ten percent increase is a good prediction, but maybe it could even be a little more.”

As the 2023-2024 review shows, the gap between buyer and seller expectations was one of the biggest obstacles to M&A activity.

This expectation gap has by no means disappeared and will arise again in the coming year. But, says Lieke van der Velden, Managing Partner at law firm NautaDutilh: “Lower interest rates will help narrow that gap. People are starting to realize that 2021 pricing won't return anytime soon. There is a reset happening in people's minds.”

Jan-Hendrik Horsmeier, Partner at law firm Clifford Chance, has the same opinion: “My forecast for the next 12 months is more optimistic than last year. There are a number of reasons for this. The first is that the bid-ask spread has narrowed. Sellers have stepped down and have more realistic expectations.”

Falling interest rates, relatively good economic prospects, adjustment to (geo)political uncertainties and the possibility of a potentially narrowing valuation gap are all contributing to the revival of dealmaker optimism. And that optimism leads them to dare to enter into more deals. And as more deals are closed, optimism continues to increase.

Marc Habermehl, M&A Lawyer-Partner at Stibbe law firm, recalls 2021. “A period of exceptionally high valuations. Everyone was eager to outbid each other for big deals. There was a strong sense of urgency – buyers felt they had to acquire certain assets no matter what. It led to pre-emptive and somewhat opportunistic bids. Assets quickly disappeared from the market as someone with a much higher valuation signed the deal within days. This haste limited the scope and depth of due diligence investigations, leaving less time to assess strategic fit or management alignment.”

Most dealmakers don't expect a return to those heydays anytime soon. Habermehl himself does not see this as being problematic: “I don't think the frenzy of doing deals as quickly as possible is necessarily sustainable or healthy. Of course, higher activity levels show confidence in the overall economy and a fast pace is crucial for doing deals, decision makers also need a moment to take a step back to make the right decision. The correction that took place after this period will ultimately turn out to be beneficial for most players in the market.”

But still: a revival is in the air, most experts think. And that could be the start of a further revival. A self-reinforcing effect.

A revival of the M&A market seems to be in the air, but there are also reasons to believe that it will take some time before that happens. And that the revival will only be limited. Or maybe it won't happen at all.

Because: if that revival does come, when? Sander Neeteson expects more clarity after the American elections. “This can lead to more certainty for companies and investors and give a boost to the market.” Peter Zwijnenburg also thinks the same way. Zwijnenburg, Managing Director M&A and Transaction Solutions EMEA at risk broker Aon, says: "I expect a short set back around the US presidential elections and then an uplift. The number of deals will increase as the year 2025 progresses." Véronique Gillis, Deals Partner at accounting and consultancy organization PwC Belgium, thinks this is too optimistic. “It will take six months to a year before we see it really picking up again.”