This stands in contrast with global respondents, who cite bolt-on acquisitions as their primary target. The difference in intentions may lie in the fact that Nordic markets are generally smaller and more consolidated than larger countries’, making most bolt-on acquisitions too small to provide sufficient value.
Whether their deal intentions are small or large, Nordic companies expect to face stiff competition, predominantly from private equity players. PE firms in the Nordics are well-established and are sitting in a lot of dry powder.
However, Nordic PEs aren’t the only firms looking to acquire. Given the level of business resilience many Nordic businesses have demonstrated during the pandemic, the region is considered one of the safest places in the world to invest at the present time. As such, US and European PE players are expected to target Nordic assets.
That said, with 61% of Nordic companies saying they’ll be considering cross-border targets, international interest is flowing in both directions.
In addition to acquiring, Nordic companies see divestments as a top driver for improving profit margins. This may increase pressure on the M&A market if the pandemic drags on and companies experience more significant financial issues.
Optimism meets pragmatism as Nordic companies chart their future
As confident as Nordic companies are of their performance during the pandemic crisis, they are proceeding with caution in the months ahead. Business resilience and operational stability will remain top priorities, even as they seek to evolve their digitization and improve customer engagement to achieve profitable growth.
Yet, despite their caution, Nordic companies also see M&A as an ideal route to transformation. This differs from the approach Nordic companies took after the global financial crisis (GFC) when M&A intentions dropped to as low as 28% in 2012. Although M&A intentions in the latest EY Global Capital Confidence Barometer (pdf) are lower than the previous year (44% in 2020 vs. 53% in 2019), this is more a reflection of a slow first half of 2020 when uncertainty around the pandemic was at its peak. Since then, M&A activity in the region has rebounded significantly.
With an appetite to seize the upside of disruption and with lessons learned from the GFC, Nordic companies are poised to use strategic and portfolio reviews to build operational resilience while pursuing M&A to accelerate growth and solidify their competitive advantage in the months and years ahead.