M&A Outlook for 2023 for M&A transactions in Scandinavia

The Nordic countries are considered stable and developed markets with strong economies. However, a lot of investment uncertainty was noticeable in 2022. How will the market evolve in 2023? What key trends will drive the Nordic M&A market?

Following our recent visit to London as part of the ‘Nordic M&A Forum 2023’ organised by the Swedish Chamber of Commerce for the UK, we have gathered many conclusions and valuable insights. In this article, we would like to share the most interesting figures from the Nordic M&A markets, as well as point out what might be the developments in the coming months.

In recent years, the Nordic market has seen several significant M&As in various sectors. Although there has been an overall decrease in activity in 2022, 2023 looks promising. By observing the market, we can identify several trends that will influence its development.

One key trend that will continue in 2023 is the dominance of the industrial and chemical (I&C) sector, which accounted for more than a quarter of all Nordic M&A by value in 2022. The sector saw several large transactions, including the acquisition of Swedish Envirotainer by EQT Private Equity and Mubadala, as well as the acquisition of Danish ingredient manufacturers Chr. Hansen and Novozymes.

Another noticeable trend is the strength of the technology, media and telecommunications (TMT) sector in terms of deal volume, although this sector did not feature in the region’s top ten deals. Within the TMT sector, digital infrastructure has emerged as a key investment theme for financial sponsors, partly due to the exponential rate of global data growth and the growing importance of core service providers. The future of the Nordic market in this area seems promising. Nordic companies often invest in technology and innovation, leading to start-ups that may become the focus of larger companies.

The Nordic countries’ reputation for health and wellbeing has also played a role in driving M&A activity. As an example, one of the largest deals in Denmark – the acquisition of Novozymes (an enzyme manufacturer) by Chr. Hansen (a biotech company moving towards a sustainable future). The growing trend of plant-based and alternative proteins in the food industry has also led to increased M&A activity in this area, as companies seek to capitalise on the demand for healthier and more sustainable food options.

The energy industry in Scandinavia is strong and innovative, with a high level of environmental awareness and sustainability. The Nordic countries use a variety of energy sources. The sector is still a promising area for investment – the Nordic countries have some of the best resources in the world. This may prove particularly valuable in the context of EU requirements for emission standards. What is certain is that achieving net zero emissions by 2050 will be difficult and may mean a lot of changes, so we recommend keeping a close eye on any news in this area. However, this does not change the fact that there are many short-term opportunities to invest in renewable energy, including solar and offshore wind projects. Hybrid projects involving hydrogen energy will also grow in importance and popularity. The North Sea will play an important role in the region’s energy future and the connection to the Baltics and Poland will be important for the development of the industry.

Scandinavia is a region with a high level of innovation and business activity, which attracts private equity investors from all over the world. Private equity activity in the Nordic countries is steadily increasing, and EQT Private Equity once again led the pack with the sale of its stake in Danish hearing aid manufacturer WS Audiology for USD 5.7 billion. It is worth mentioning that much of the PE/VC fund activity is focused on industries, i.e. technology, healthcare, energy and food. Private equity activity in Scandinavia can be expected to remain high in the coming years.

In terms of individual markets, Sweden remained the most active M&A market, accounting for almost half of the value of all transactions in the region. Denmark and Norway, despite having a smaller share in the region, have shown resilience to global problems. In terms of transaction volume in 2022, Denmark recorded a decrease of only 3% compared to 2021, and Norway an increase of 1% compared to 2021. Interestingly, Denmark in the same period (2022) recorded a 35% increase in the value of mergers and acquisitions, reaching the level of USD 24.6 billion. This happened e.g. thanks to the already mentioned largest Danish transaction of the year – the merger of ingredient producers Chr. Hansen and Novozymes, the value of which amounted to USD 10.6 billion. Meanwhile, Finland has seen a strong focus on the TMT sector, with 6 of the 10 largest deals announced in the country in 2022 being in this sector.

Looking to the near future, the Nordic countries’ strong reputation for innovation and technology is expected to continue to drive M&A activity, particularly in the areas of digital infrastructure, health and wellness and alternative proteins. Additionally, private equity firms are likely to continue to look for growth and consolidation opportunities in the region’s markets. While the macroeconomic and geopolitical situation may have slowed M&A activity in the Nordics in 2022, the region’s strong fundamentals and long-term growth prospects make it an attractive destination for domestic and international investors.