HORIZONS | BDO'S GLOBAL VIEWOF MID-MARKET DEAL ACTIVITY 31
NORDICS TRANSACTION ACTIVITY FALLS SHARPLY BUT REMAINS STRONG FROMA HISTORICAL PERSPECTIVE
Transaction activity in Q3 2021 dropped substantially from the record-breaking highs recorded in the previous quarter, with 74 deals completed with a total value of USD 5.2bn. This was largely to be expected as third quarters are traditionally characterized by relatively low transaction levels due to the summer holidays. Nonetheless, relative to previous Q3 periods, this was still the second busiest in terms of volume. However, we are starting to see signs of reduced investment appetite from PE buyers, indicating that the recent M&A wave might have passed its peak. Private equity buyers were less active in terms of both deal volume (13.6%) and value (8.8%). Available dry powder from the unparalleled fundraising throughout 2020 and low interest rates have driven valuations upwards. The average deal size for PE was USD 83.3m in Q3 2021, compared to USD 66.1m for strategic buyers. This difference could partly be explained by a reduction in the number of attractive targets for PE investors during the recent M&A wave, which has resulted in competitive auction processes.
Additionally, PE investors are now seeking out larger deals to employ committed capital more efficiently during the investment phase of their funds. Consequently, PE investors accounted for a larger share of overall deal value (30.3%) compared to both the previous quarter (23.8%) and Q3 2020 (25.6%). TMT and Industrials & Chemicals retained their positions as the region’s dominant sectors with 23% and 27% of transactions respectively. The sectors that saw the biggest increase in quarterly activity were Financial Services and Pharma, Medical & Biotech, with seven and nine deals respectively, representing increases of 40% and 50% from the previous quarter. All in all, we are seeing indications that the broader M&A wave that dominated the Nordics during the pandemic may now have passed its peak. However, it’s worth keeping in mind that the summer months are traditionally slower for M&A activity, and it’s possible that it could ramp up in the last quarter of the year. Traditionally, Q4 is a strong period for M&A, and we could see a more transaction-heavy quarter as Nordic economies continue to reopen post-pandemic. KEY SECTORS AND DEALS Industrials & Chemicals with 20 deals and TMT with 17 remain the biggest contributors to M&A activity, together accounting
BIG PICTURE
• Following a record-breaking second quarter, Q3 2021 was considerably slower, both in terms of total volume (down 45.2%) and value (down 48.1%) • Compared toQ3 2020, deal volume and value fell by 2.6% and value by 23.0%. However, it’s worth noting that Q3 2020 might have been particularly hectic due to high levels of PE fundraising and the completion of several postponed deals as result of the pandemic • Sectors that saw increased activity compared to Q3 2020 included Financial Services (40%), Industrials & Chemicals (25%), Pharma, Medical & Biotech (350%) and Real Estate (400%) • Volume from strategic buyers increased by 1.9% while PE volume dropped by 13.6% compared to Q3 2020.
PE/TRADE VOLUME &VALUE
160
12,000
140
10,000
120
8,000
100
80
6,000
60
4,000
40
2,000
20
0
0
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