M&A

Dealmakers Warm Up to Scandinavia


“Money always flows to the safe haven”

Photo illustration by 731; Photograph by Dave Moorhouse/Getty Images

“Money always flows to the safe haven”

While Southern Europe struggles to bring in foreign money for mergers and acquisitions, the Nordic region is on fire. Sweden, Norway, Denmark, Finland, and Iceland have seen about $288 billion in deals since the financial meltdown began in 2007, according to data compiled by Bloomberg. That puts the region, with a population of about 26 million, well ahead of countries such as Spain, which has about 47 million, and Italy, home to about 61 million. “If I’m selling a business with lots of exposure to France, the interest goes down fast,” says Kristian Terling, who handles the Nordic business in the London office of Los Angeles-based investment bank Houlihan Lokey. “I say ‘Sweden,’ the mood softens.”

Sweden’s economy has grown by more than 10 percent since 2009, according to government records. While Sweden’s growth for 2012 is projected to have slowed to 0.9 percent, it’s still expected to beat the euro region, which is contracting. All of the Nordic countries boast triple-A credit ratings and the region overall is projected to expand by 2.1 percent this year. “The countries are very well established with good growth records, they speak English, and they have stable politics,” says Pip McCrostie, global vice chair of transaction advisory services at Ernst & Young, based in London. “Money always flows to the safe haven when it’s looking to avoid risk.”

Foreign buyers are especially attracted to the region’s many export-driven companies, whose revenue is less dependent on any one country. “Many Nordic-headquartered businesses have specific technologies and products with global reach,” says Tom Bernhardsen, a director at Credit Suisse Group’s (CS) investment bank. In December, Deerfield (Ill.)-based Baxter International agreed to pay $4 billion to acquire Swedish medical-equipment maker Gambro, which has 13 production facilities in nine countries and sales in more than 100 nations. For similar reasons, possible deals include Microsoft (MSFT) buying Finnish mobile-phone maker Nokia Oyj (NOK) and rivals making a play for Nokia Siemens Networks.

Among the Scandinavians, Sweden draws the most buyers, with $113 billion of acquisitions since 2007 by companies with headquarters abroad, followed by Norway with $95 billion, according to data compiled by Bloomberg. About 631,000 Swedish companies, amounting to more than 20 percent of the country’s private sector, were owned by foreign companies in 2011, compared with less than 5 percent in 1980, according to a report from the country’s official statistics bureau. Stefan Fölster, chief economist at the Confederation of Swedish Enterprise, says the country appreciates the new capital, ideas, and markets that come with foreign ownership. “The history of Volvo Cars is a very good example of a company people believe wouldn’t have survived had it remained Swedish,” he says. Ford Motor (F) bought Volvo in 1999, then sold it to China’s Zhejiang Geely Holding Group in 2010.

There’s been little opposition to the fallout from cross-border deals in Scandinavia compared with increasing protest elsewhere in Europe, says Fölster. Volvo saw minimal resistance when it cut production in Sweden while seeking to expand operations in China.

Acquisitions by Nordic buyers in 2012 fell 42 percent from 2008 levels, to $45 billion, according to Bloomberg data, even though Scandinavian companies hold about $103 billion of cash, 30 percent more than they did four years ago. Says investment banker Terling: “They have the financial strength for deals but are worried about the economic outlook.”

The bottom line: With $288 billion flowing in from deals since 2007, the Nordic region has attracted more money than nations such as Italy and Spain.

Simmons is a reporter for Bloomberg News in Paris.
Levring is a reporter for Bloomberg News in Copenhagen.

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Companies Mentioned

  • CS
    (Credit Suisse Group AG)
    • $27.55 USD
    • -0.15
    • -0.54%
  • MSFT
    (Microsoft Corp)
    • $47.06 USD
    • -0.46
    • -0.98%
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