Business performance Merchant Banking

 

Strategy and focus

Through the Merchant Banking business NIBC advises, finances, and co-invests with its mid-cap clients in the Benelux and Germany.

 

The following services are provided by Merchant Banking:

  • Coverage bankers maintain long-term relationships and provide strategic advice to NIBC’s mid-cap clients in the Benelux and Germany. Together with product specialists operating in multidisciplinary teams, client teams deliver a wide range of customised products and solutions, including M&A advisory, financing, derivative products, mezzanine and equity investments;
  • M&A provides advisory services in close cooperation with the coverage bankers. It executes M&A-related transactions, including mergers, acquisitions, disposals and buyouts; and
  • Investment Management creates and manages funds that are open to third-party investors. Funds have been developed in the fields of private equity and mezzanine (in companies), infrastructure and real estate. Investment Management also manages and services the bank’s direct investments and investments in third-party funds.

 

 

Behind the 2008 numbers

In line with the difficult market circumstances, the Merchant Banking activities were under pressure in 2008. The turmoil in the financial markets negatively affected fair value adjustments on our equity investments. As a result of the deteriorating economic environment, fee income slowed down in the second half of 2008. The decline in net interest income mainly reflects the smaller corporate loan portfolio. All in all, this resulted in Operating income of EUR 32 million, 87% lower than in 2007. Operating expenses were 23% lower, mainly as a result of a decrease in variable compensation and the number of staff. Impairments were made on the corporate loan portfolio, on equity and mezzanine investments and other interest bearing assets. Together these factors led to a loss of EUR 55 million for 2008. 

 

 

Transaction highlights

NIBC arranged important client transactions in its home markets last year, despite the challenging market circumstances. Examples include:

  • NIBC acted as advisor to the family shareholders in the sale of Grolsch to SABMiller;
  • NIBC Merchant Banking Fund closed several transactions. In Germany the fund acquired Gebr. Reinfurt GmbH Co. KG, a specialist manufacturer of miniature, high-precision ball bearings. In the Netherlands the fund invested in the management buy-out of Euretco, a retail service provider, and acquired a majority stake in the Dutch sheet pile specialist Busker Hei-en Waterwerken;
  • NIBC European Infrastructure Fund (the Fund) acquired a 49% stake in the SAV group, its first investment in waste incineration assets. In addition, the Fund took a minority stake in Electrawinds Biostoom NV, owner of the bio steam power plant that is currently being built in Ostende; and
  • NIBC and Commonwealth Investments set up the EUR 64 million European CMBS Opportunity Fund, a fund that aims to capture some of the opportunities that have arisen in the current credit environment.

 

 

Outlook

Merchant Banking activities look set to remain under pressure. Recessionary conditions will reduce demand for credit, and there will be fewer M&A volumes and private equity exits. However, NIBC will continue to seek out meaningful transactions in which it can advise, finance and co-invest with its clients.