A small geographical market and linguistic and institutional complexities actually encourage openness and agility on the international business front. Interview of Gabriel Englebert, BNP Paribas Fortis.

The Merger and Acquisition (“M&A”) market in Belgium has been growing steadily since 2016, as the Vlerick Business School’s most recent M&A Monitor can attest. Our companies are once again showing their desire in 2018 to expand in Europe and even beyond. Gabriel Englebert, Head of Corporate Finance: « It’s not all about the BEL 20 companies, I assure you. I’m proud to confirm that the companies looking for acquisitions are among the top 300 Belgian firms ».

Looking beyond Belgium at a very early stage

In a narrow national market, made up of different regions and languages, our companies sometimes have to start exporting at a very early stage of their development. As a result, Belgian companies are natural exporters with a decentralised culture that is extremely favourable to M&A. Belgian companies have solid shareholders and management teams that are often multilingual, highly educated and able to recruit international profiles. Our country is also an ideal territory for niche sectors such as life sciences and healthcare, agri-food, aerospace, industry, building materials, services, consumer goods and technology.

High valuations

"It’s not so much the absolute deal size that strikes me, but the valuation levels. Valuation levels are high, with rising EV/EBITDA multiples."
Gabriel Englebert.

A combination of factors can explain such high valuations: the scarcity of opportunities, the amount of cash available and the low interest rate environment.  "Current EV/EBITDA multiples can hit very high levels well above 10x. Those are big numbers for only the very best companies in the market!"

Exploring new countries, new activities and technologies

Building on their success, Belgian companies are ready to invest in foreign target companies to gain new market access or knowledge of a country, or to test an adjacent product or service. In a third of all M&A deals, the target is a foreign one. On average, these transactions take six to twelve months to complete – the time needed to negotiate the price and terms, conduct due diligences and clear regulatory approvals, taking account all the while of cultural differences, that can be substantial in some cases.

Gabriel Englebert: « Lastly, I would pinpoint two trends for 2018 among the big Belgian groups: the pursuit of innovation – in many cases a specific technology or know-how – and continued investments in the field of sustainability. ».

The M&A market is changing, we need to be innovative

The traditional auction process involving a very large number of potential buyers, used to dominate the market in the past. This type of very standardised process was sometimes contrary to the desire for discretion of our Belgian clients, who favour highly discrete transactions.

Belgian business leaders do not expect the same from their investment banker in 2018 as they did in the past. Gabriel Englebert: « We are in a world of bespoke processes and tailor-made solutions, and I am absolutely delighted about that! Our ‘made-to-measure’ approach is perfectly suited to our bank, which nurtures long-term relationships with our clients. Our teams use their know-how to articulate in-depth solutions. It means, for instance, that we do not disclose all our recent transactions, even though they are very large in number and in quality. Our business is all about discretion and pure trust. »

What’s the investment banking business model in 2018?

We help and coach business leaders making the right decision in complex, life-changing merger and acquisition transactions, of which some are industry-transformational. Is artificial intelligence set to revolutionise our core business? Gabriel Englebert: « Not in my view. Why would a business leader still need us in 2018? The answer is that we completely trust our ability to offer effective but nuanced judgement regarding many complex M&A situations ».

Backed up by their internal experts, business leaders have massive amounts of information and analysis tools available, together with unlimited data available on the web and consultants’ reports on specific fields. But there is actually too much information out there these days and that can result in confusion. In this context of information obesity, we make a real difference in terms of tactical advice and decision-making timing. A profession like ours, which is founded on intangible factors like trust and confidentiality, demands dedication at every moment. Gabriel Englebert: « As for me, I have already made my choice: I am happy to jump on a plane if a client across the Atlantic needs my advice on a complex transaction ».

Timing in M&A: the key to success

Gabriel Englebert: « Our clients’ interests are our absolute priority. We’ll finalize the transaction in less than three months, if that’s what the parties want ». Other elements are sometimes at stake too, such as business succession or the transfer of shareholdings. Consulting your investment banker about family governance can also bring some helpful neutrality to the thinking process.

What about the future?

Gabriel Englebert: « I would pick out two structural factors: (1) The M&A market, which I believe is to stabilise. Central Banks intend to raise interest rates progressively, which can decisively reshape stock market valuations. (2) The profession: the investment banking model will evolve again: in five or ten years’ time, a new generation will pick up the profession that is fantastic on both human and professional terms. M&A ‘advisory boutiques’ are flourishing but a natural selection will be unavoidable and some will disappear. But we’ve been around for 200 years now and I expect us to be here for a lot more years to come ».

A young Belgian company that installs biogas facilities on farms is growing fast. Here’s how BNP Paribas Fortis is helping its development.

Biolectric is the epitome of the sustainable do-economy: it manufactures and sells anaerobic digesters, which are installed on farms so as to produce ‘green’ energy based on the biogas released from the farm’s own manure.  The green heat and power generated from cow dung make the farm an energy-positive business.  No less important is the fact that this approach reduces emissions of the powerful greenhouse gas methane by up to 70%. The average Biolectric reduces greenhouse gas emission by an equivalent of 2.000 kilometers driven in an modern car.

The company, which started up in 2011 in the East Flanders municipality of Temse as a typical scale-up, nowadays sells anaerobic digesters to farmers all over Europe.

Biolectric is a fast-growing company. In 2019, in order enable further growth, the bank provided the firm with a series of credit facilities, mostly in the form of a ‘sustainable impact loan’.

Sustainability policy

Tom De Winter is Biolectric’s contact at BNP Paribas Fortis. He tells us: “The bank has been working with Biolectric since the very beginning, but the relationship has become much closer since 2017. In order to obtain a better grasp of their technology, I’ve visited the firm several times with expert from our Sustainable Business Competence Centre. It’s very important to be able to understand and evaluate the firm’s technical proposition. When Biolectric founder Philippe Jans and industrial investment company Ackermans & van Haaren (AvH) came to talk to us last year about the imminent onboarding of the company by AvH, and the subsequent creation of a new low-threshold business segment, namely the construction of a facility with its own anaerobic digesters so as to be able to sell electricity to farmers in Belgium, the Netherlands and France, we knew straight away that we ought to go along with them on the project.”

“We weren’t the only bank in the running, but the client had clearly chosen us. The coordinated approach of BNP Paribas Fortis and our clear policy of backing sustainable solutions played a big part in that decision,” explains Tom De Winter.

Biolectric

As a pioneer, Biolectric has independently developed compact anaerobic digesters, known as ‘pocket digesters’, specifically designed to turn cattle dung into electricity and heat. Today there are over 200 of the company’s installations operating all over the world. This technology provides Biolectric farmers with a very nice economical as well as ecological return on their investment.

In 2019 Ackermans & van Haaren, which is also a BNP Paribas Fortis client, acquired a 60% stake in the company from Taste Invest, with founder Philippe Jans retaining the remaining 40%. AvH brings its professional management experience to Biolectric, thus strongly boosting the firm’s growth potential.

The coronavirus crisis prompted the Belgian Treasury to issue additional debt securities. In just a few days, BNP Paribas Fortis and four other Primary Dealers launched a new government bond on the institutional investment market.

Treasury certificates and government bonds (known as OLOs) are an important source of financing for the Belgian State. They offer investors the possibility to lend money to the country in exchange for periodic interest. At the end of December last year, the Treasury assumed it would have to issue debt securities worth €30 billion in 2020. That would happen via an increase in the number of existing bonds, and through two new OLO transactions.

The corona crisis increased the country’s financial needs significantly. So, at the end of March, the Federal Debt Agency decided to issue additional tenders for the OLOs in circulation. It also immediately halted the repurchase of certain bonds, and raised the issuance target for Treasury certificates.

New OLO

An additional measure was the issue of a third new government bond: OLO91. “This is a medium-term loan,” says Jean Deboutte, director of the Treasury. “The maturation date is 22 October 2027. With a zero-percent coupon, this bond is neutral for our annual budget.

“We wanted to bring OLO91 to market as quickly as possible. That has happened in a period of just a few days. It is also the largest ever OLO issue: €8 billion. We have attracted investors from 31 different countries, and around one-fifth of the volume comes from non-European buyers. That confirms the worldwide popularity of Belgian government bonds.”

Primary Dealer

The fast launch of OLO91 is in part thanks to BNP Paribas Fortis. “As a Primary Dealer, we take care of the placement and promotion of the bond among institutional investors,” says Director Debt Capital Markets Stefaan Van Langendonck. “We also reinforce activity and generate liquidity of OLOs and treasury certificates on the secondary market.”

Belgium has 12 primary dealers. They drew up a contract with the Treasury based on the Code of Duties. “BNP Paribas Fortis can rightly consider itself one of the most important intermediaries for Belgian bonds,” says Mr Van Langendonck. “Each year, we are invariably among the top three most active Primary Dealers in the country. Often we are number one.”

Lasea conceives precision laser solutions for high-tech industry. Faced with the coronavirus crisis, the Liège enterprise revived an old project to decontaminate surgical masks – and respond to the shortage of face coverings.

The secret weapon of Lasea is the femtosecond laser. This has an accuracy of 0.2 micron, 200 times smaller than a hair. Lasea’s high-tech equipment is notably used in horology, electronics, medicine and pharmaceuticals. Given the shortage of surgical masks, the Liège enterprise revived an old project for decontaminating, as Lasea CEO Axel Kupisiewicz explains.

“We had tested laser decontamination 20 years ago. At the time, the project had no commercial outlets. With the coronavirus crisis, we proposed using it to decontaminate used surgical masks. That’s how we joined a consortium managed by the University of Liège to develop a decontamination chain. Usually, it takes many months, even years, to carry out the tests and obtain certification. Thanks to the collaboration between the university and the Walloon government, everything was done in a few weeks.”

Reinvention thanks to a crisis

Lasea proposed two decontamination techniques. “For the first, we used a laser device manufactured by Aseptic Technologies from Gembloux, which we adapted to meet local needs,” explains Mr Kupisiewicz. “For the second, we have entered into a partnership with Optec, in Mons. This latter solution makes it possible to treat three or four times as many masks each day.”

Lockdown has also generated a new dynamic within the business. “We launched a brainstorming session to refine the strategy for the coming years. The result: a new organisation after the move to our new building, financed by BNP Paribas Fortis. On the other hand, the widespread use of videoconferencing has created a new dynamic at the heart of the company. Previously, the Belgian team, who were gathered physically on site in Liège, were in a way privileged in meetings with their French, American or Swiss colleagues, present via videoconferencing. Now, everyone is on an equal footing because everyone is behind their screen by themselves. It’s one of the interesting aspects of lockdown that has created a global spirit in an international group.”

A relationship of trust

“BNP Paribas Fortis has been by our side since the beginning, 21 years ago,” recalls Mr Kupisiewicz. “First via the local branch in Sart-Tilman and now, for seven years, via Corporate Banking. Given Lasea’s developments, enlargement to several banks was necessary, but BNP Paribas Fortis remains the primary bank. I place huge importance on personal relationships and a climate of trust. Be it the branch manager or staff at Corporate, our relationship managers know our activities and our products. It’s important: they understand the issues we face and as a result they know our financial needs.”

“Since the beginning of the crisis, the bank has asked if we need support to develop this project of decontaminating masks. We have been able to implement these solutions by redeploying our teams and we have not needed a large injection of capital. We have, on the other hand, welcomed the moratorium on repayment of capital on all our investment credits.”

The Antwerp technology company Rombit has developed a safety bracelet for workers in ports and industrial settings. This guarantees social distancing, and also allows for contact tracing in the event of coronavirus infections.

Since 2012, Rombit has developed digital applications for maritime businesses, port terminals, the industry and building sites. Its software and hardware solutions aim to make operational activities more efficient, safe and dynamic. For the purposes of social distancing, the company has now launched a smart bracelet: the Romware Covid Radius.

“This wearable tech guarantees 1.5m distancing,” explains CEO John Baekelmans. “If two employees get too close to each other, it sets off an alert. Thanks to contact tracing, a prevention advisor or confidential counsellor can check which colleagues an infected worker has come into contact with. Their privacy is 100% guaranteed. That is unique.”

Huge interest

The Romware Covid Radius is a variation on the existing Romware ONE: a bracelet that brings together 20 safety functions, including access control, an incident tracking system and an alarm for approaching vehicles. In just two weeks, Rombit optimised a derivative solution that facilitates safe working during the coronavirus outbreak.

“An extensive test of the Romware Covid Radius is being carried out in the Port of Antwerp,” says Mr Baekelmans. “Roll-out to other businesses will follow and they will integrate our safety bracelet into their new way of working. There is already huge interest at home and abroad. We are talking with some major players in the industrial sector.”

Social responsibility

In response to the great interest in the Romware Covid Radius, Rombit has already markedly increased its production in Taiwan. Mr Baekelmans also expects a growing need for short-term financing. “Close cooperation with your lender is essential,” he says. “In BNP Paribas Fortis, we have a good partner.”

“Rombit is part of the BNP Paribas Fortis Innovation hub,” says relationship manager Conchita Vercauteren. “With the hub, the bank supports innovative start-ups and scale-ups that are contributing to a better society. The fact that Rombit wants to distribute its coronavirus solution so widely and at as low a cost as possible clearly testifies to social responsibility.”