The Nordics have experienced a noticeable downturn in the first quarter of 2020, following a relatively strong 2019 and a rumoured strong pipeline coming into the new year with continued interest in the regions high-quality assets. Activity reached a total €2.7bn across 201 deals, a 74% fall compared to the €10.6bn seen in 1Q19 to its lowest quarterly figure since 3Q09 €1.5bn.  

The region suffered a noticeable fall in activity in March to just €188m, as Europe began to grapple with the growing concerns around coronavirus and the implementation of social distancing measures. 

Outbound deal activity represented a bright spot for the region, with 76 deals generating a total of €10.6bn, the second strongest start to the year on Mergermarket record and the most active quarter since 2Q19.  It remains unclear how this trend will continue through the rest of 2020 given the reliance on banks for funding and the economic hardship likely to hit in the coming months.  

Uncertainties surrounding the spread of coronavirus and the introduction of social distancing measures are having a clear effect on cross-border M&A so far this year. 1Q20 saw a 68.3% drop in foreign investment into the Nordics from €4.7bn in 1Q19 to €1.5bn this year.  

Dealmakers seem to be a reluctant to pay the high premiums often needed for high-quality Nordic assets in such uncertain times, and a further hit is likely in the coming months as firms look to withhold large-scale spending. After several strong years, the quarter saw a fall in Asian interest in the region hitting a value of €181m across four deals – the lowest quarterly volume since 1Q15. 

Over the past decade, the Nordic region has established itself as a sustainable tech-hub and the technology sector has seen its influence over M&A increase over recent years. The sector reached a 14% market share by value and 22.8% in volume in 1Q20, up from 9.3% and 18.0% in 2019. This is compared to a 9.9% share across Europe.  

A total of €380m was generated in the first quarter with a greater interest in small and medium-sized enterprises.  Interest in the technology sector is expected to remain high as the virus forces businesses to rapidly transform working practices and increased dependence on online solutions.  

For more insights on the Nordic markets, register to attend the Nordic M&A and Private Equity Forum on September 30th in Stockholm. 

Thorsten Louie Pedersen Research Analyst Mergermarket