Baby Boom

of Baby Gloom?

The man who makes my fishing poles wants to transfer his business. The company has been operating for more than 80 years. Many years ago it passed from father to son. Now it’s time for the son to start enjoying a well-earned retirement. The problem is, there is no successor in the family, and a sale within the industry or to an investment company or a listed company is not an option either.

In 2009 just under 60,000 Dutch companies were dissolved. One in four of these were companies run by baby boomers. According to a 2006 report by the Netherlands Institute for Social Research (SCP), there would be 2.5 million pensioners in the Netherlands in 2010, including 100,000 business owners who were still economically active at the time this report was published. These 100,000 business owners face or faced the challenge of fi nding a buyer for their business in time. Another relevant fi gure is that every year around 20,000 business transfers take place in the Netherlands. Given the aging population, the number of such transfers should surge in the coming years. The success of most business transfers depends on two things: fi nding a successor and financing the purchase price.

In addition to the demographic changes in the Netherlands, the financial markets are of course also changing fast. Take the potential disintermediation of banks, reinforced by Basel III. These new regulations’ stricter capital requirements may lead to a change in the supply of takeover and other financing. For instance, the financing of goodwill – which accounts for a large proportion of the selling business owner’s retirement fund – will be a more diffi cult proposition for the banks in the coming years. This is because the banks are demanding more security.

At the moment the financing solutions have to be found in creative structures, with payment of the purchase price spread over several years (and sometimes depending on results). This is possibly in combination with government facilities, which certainly make the financing of a takeover easier for banks.

The fate of the Dutch economy is determined to a large extent by around 1,500 companies in the Netherlands. These companies require unconventional solutions for fi nding succession for their capital structures. In my view, the time has now come to create opportunities for these companies. For instance by facilitating them in securing direct financing on the capital market, for both public and private borrowed and equity capital.

I hope that these opportunities will emerge, despite the changes within the financial markets. How quickly these opportunities become available to all companies is partly in our own hands. Zanders is of course happy to make a contribution. After all, isn’t it a noble aim to ensure that we can all enjoy some good fi shing in our retirement?

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Basel III     care     cash management     corporate finance     corporates     credit risk     financial institutions     financing     hedge accounting     modelling and valuation     processes and systems     public sector     risk management     SAP     strategy and organization     SWIFT     treasury     treasury management     valuation desk     WACC