Market Spotlight: Nordics Deal Momentum

By Suzy Bibko, Content Marketing Manager, EMEA

The Nordics region has been known as an early and keen adopter of technology. And no doubt that has helped with M&A over the past year, as working remotely has meant a greater reliance on technology to get deals done. But as vaccines are rolled out and things slowly return to normal (or a new type of normal), what will drive M&A activity this year? Will dealmakers continue to embrace technology? And what learnings from the pandemic can be carried forward? Auri Aittokallio, Rosie Corcoran, Jonas Olsson, Anna Orlander, and Shoan Panahi discussed these issues are our recent webinar.

Sustaining the deal momentum
Although overall Nordic M&A activity fell 17% in 2020 from 2019, the region finished the year with a strong final quarter: €41.3bn was spent in the region in Q4, the region’s highest quarterly value since 2006, driven by five deals worth at least €1bn (mergermarket.com). Can the momentum be sustained?

“I think so,” says Orlander. “The Nordic M&A market was strong in the second half of 2020, and the Swedish economy seems to be doing well. I think M&A may even be on the rise. So, we definitely see a bright future here for the months ahead with continued confidence in the market from investors. We still see an inflow of IPOs, from Nordic investors, Europe, and the US, although slightly less from other regions because, regardless of the pandemic, cross-regional deals have been a bit more tricky recently given trade wars and increased foreign investment regulation across Europe.”

And what about private equity’s role? Firms were particularly active in H2 in the region: buyouts reached €16.6bn (129 deals) in the second half of 2020, after registering just €951m (67 deals) in the first half of the year; exits were also up, with 67 deals worth €18.6bn in H2, compared to 41 exits worth €105m in H1 (mergermarket.com). And according to our poll during the webinar, practitioners from the region think PE should continue to make an impact on market activity this year.

Moreover, the region’s general reaction to the pandemic has helped M&A there. “Sweden has been quite good and the Nordics, in general, have remained quite open, compared to other regions that have closed down,” says Orlander. “If we get the vaccine out across the world we may see the return of both buyers and sellers that have held off during the pandemic.”

“Although large-cap, big-ticket deals still seem to be waiting a bit, right now everything seems to have come back,” says Panahi. “However, we also need to look at the IPO market, which is the sort of the most attractive route for many right now, given the valuations you see on the public market as opposed to the private market. So, what will happen when we have a massive queue of companies that want to go public, how long will that window be open for investors? That remains to be seen.”

Olsson stresses that, “We need to figure out where we should be, what we need, and where we need to be after the pandemic. It’s guesswork, but we need to do that guesswork and find the M&A opportunities and take them when they come, because they are coming.”

Early adoption for dealmakers
Whatever the route and timing, for both companies and investors, it appears that the beginning and end of the deal process will be most important for success this year. And this is where technology can really play an impactful role – even in a region that normally has high adoption rates. 

“Technology is very much enabling and supporting these investment strategies across all parties, on both the buy-side and sell-side,” explains Corcoran. “And what’s interesting is that clients are coming to us earlier on to prepare that information, and they're relying on technology like artificial intelligence to be able to do that. We’ve seen an uptick in the use of technology in areas of deals where, historically, it hasn't been used before. For instance, asset marketing has been an area that’s been relatively unchanged for decades. But now, companies are starting to question whether this can be done more efficiently, and it can be. We have an application, Datasite Outreach, that streamlines the asset marketing process, and frees up so much of the time that used to be spent on overly manual tasks, and also provides insight on buyer behavior. And with due diligence, which according to our new report The New State of M&A: The Nordics, is the part of the process that the majority of Nordics practitioners believe could be most enhanced by digitization, our tools can accelerate the whole process.”

“But the really important thing to note here is that the Nordic market in particular has always been looking for ways to create these efficiencies, more so than other clients that we work with,” continues Corcoran. “And that's why we always go to our clients in the Nordics for feedback on new technology. They're the first ones to adopt it and use it with their processes. And over the past year it’s been a really exciting time to work alongside our clients there.”