As inflation retreats and with interest rates stable or falling, the Nordic M&A market is well-placed for a recovery in 2024.

At our recent Dealmakers Dialogues event in Stockholm moderated by Simon Watkins, experts Peter Wikstrom, Karl Bystedt Wikblom, Darragh Byrne and Merlin Piscitelli discussed the outlook for 2024 and the role technology could play in the dealmaking process.

Dealmaking to bounce back

Turbulent financial markets, high inflation and rising interest rates took a toll on M&A activity in the Nordic region in 2023, with deal volumes and values down across the board. But the panellists in our Stockholm debate agreed the path ahead was clearer, with inflation already far lower and interest rates set to follow.

Wikblom highlighted the pent-up demand from private equity firms, with plenty of dry powder and under pressure to deploy capital, and corporates looking to rebalance their business, adjust to new geopolitical realities and build their technology capabilities. The other panellists agreed with the more positive outlook and Piscitelli reported that Datasite had seen a strong uptick in activity from private equity managers in its data services.

While M&A interest is in its early stages, the rise in activity bodes well for completions in the second half of the year.

But while the panellists were unanimous that the outlook has vastly improved from 2023, there were some caveats. Wikstrom emphasised that baseline expectations from sellers would need to adjust to the new economic environment and said geopolitical issues – Ukraine, the Middle East, and a slew of upcoming elections across developed markets – could present headwinds to deals.

Byrne, meanwhile, raised potential regulatory challenges, notably around antitrust and concerns over foreign direct investment that could create hurdles for deals in 2024.

While private equity managers have considerable dry power to deploy, corporates are also well-placed, according to Wikstrom, with many groups in his own sector and across industry being well-capitalised and looking for strategic acquisitions or disposals. The panellists all agreed that bolt-ons and carve-outs were likely to be a feature of the dealmaking landscape in the year ahead.

Wikblom also pointed to the legacy of the Nordic IPO boom of 2019-20, which has created a sizeable segment of small- to mid-cap listed businesses, many under-researched, that could prove attractive acquisitions to larger players.

M&A targets and tools

When it came to the sectors most likely to be subject of M&A activity, Byrne and Wikblom cited energy and industrials, including oil and gas. With energy security now high on the public agenda, Piscitelli suggested there may be a rebalancing away from the renewables sector that has attracted huge capital investment in recent years.

Technology was also seen as a potentially active sector. Piscitelli was keen to emphasise that dealmakers would be attracted not just to the technology firms, but also to tech-enabled businesses – those companies that were using technological advances to improve productivity and profitability.

As well as tech firms being the subject of possible M&A activity, the panel also discussed technology as a tool in the M&A process.

The benefits of technology are already being felt in the M&A process. Wikstrom pointed to the far greater detail in operational data now available to buyers, including down to the level of individual invoices, that enables more sophisticated understanding of target companies.

Access to raw data, the ability to redact documents electronically and complete deals remotely with e-signatures were all cited as advances that had smoothed the M&A process. However, the panellists all agreed technology was still being underused, but anticipated that a younger generation of dealmakers would drive technology uptake.

Things can only get better

While voicing concerns over regulation and geopolitics, the panel’s outlook was soundly positive. With corporates ready to reshape and rebalance their businesses and private equity keen to deploy capital, there is a building head of steam for activity. And with inflation and interest rates stable or falling, it should be far easier to get buyers and sellers to reach agreement over valuations.

After a tough 2023, the outlook for Nordic M&A in 2024 looks far healthier.

To learn more about Datasite events, click here.