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Belgium Private Equity Financing

Belgium Private Equity Financing

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Published by epithomy
status of the Belgian Private Equity Financing market
status of the Belgian Private Equity Financing market

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Categories:Types, Business/Law
Published by: epithomy on Jul 19, 2013
Copyright:Attribution Non-commercial

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10/21/2014

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2013How to Finance Smalland Middle-Market Private Equity Dealsin Belgium?
 Joris Van Gool
Under supervision of Professor Paul A. Gompers
HARVARDBUSINESSSCHOO
 
iii
Why this study?
This study assesses, at the beginning o 2013,
how do small and middle-market private-equity(PE) deals in Belgium get fnanced and which uture changes can be expected.
There is ongoing talk on how the prolonged credit and sovereign crisis is changing the wayEuropean leveraged buyouts (LBOs) get nanced. Due to stricter Basel III regulation and a gen-eral deleveraging trend, European banks are expected to reduce their balance sheets with EUR 2-3trillion post-crisis.
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As a result, banks have been reducing debt exposure across most lending cat-egories, including private equity-backed companies.
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Current collateralized loan obligation (CLO)unds, which were mainly raised in 2006-2007 with seven-year investment periods, are still activein the market or mid-market and large deals. However, they are expected to wind down in thenext years with only one new European CLO launched since 2008 by March 2013.
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On the non-banknancing side, several credit unds have launched vehicles to step in a possible European lend-ing gap.
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Corporate bond issuances, including high-yield bonds, have also been on the rise in end2012-early 2013, partly replacing bank-loan nancing. However, public bond issuances are mainlyrenancings or larger issuers and come less to the benet o acquisition nance o small and mid-dle-market deals.
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While it is uncertain how the specics will play out, the
traditional bank-basedmodel o European LBO fnancing will continue to be challenged.
While the Belgian LBO debt market is only a raction o the European market, it is a particularlyinteresting case. The Belgian banking market has historically been exceptionally large (bank assetswere ca. 470% o GDP in 2006 versus Euro-area average o ca. 250%) and strongly concentrated(top 4 banks represented ca. 80% o the market in 2006). What’s more, all major banks underwentimportant changes over the past years: Fortis was integrated in the French BNP Paribas bank andsplit o its insurance activities, Dexia got nationalized and reocused its activities as Belus, KBCgot bailed out and reocused on retail and small-business customers, ING split its insurance and banking activities but retains commercial banking as a core activity.
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In this context, Belgium is aninteresting case to assess what happens with the fnancing o small and middle-market LBOs ina historically bank-dominant market that undergoes major change.
INTRODUCTION

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