Our latest deal terms study is now available which provides a detailed insight into the terms of Swedish private M&A transactions.
More unstable and uncertain deal environment: Overall, the M&A activity in Sweden remained relatively strong in 2019, although the number of transactions started to decline in 2H19 in particular in the large-cap segment. In particular PE investors have been more cautious in expectation of a market adjustment. The lower levels of activity in the private M&A arena were to some extent compensated by more activity on the public side and this is expected to continue in 2020. The absence of suitable privately-held targets and competitive auction processes with inflated valuations are other reasons for an increased public to private activity.
More cautious approach by investors: W&I insurance continues to be frequently used in transactions, in particular above MSEK 500 deal value where around 50% are underwritten. However, compared to 2018, we saw a decline in the overall use of W&I insurances. The increased use of material adverse change (MAC) provisions and the buyers’ success in obtaining additional security for sellers’ obligations reflect the more uncertain environment. Buyers were also more successful in raising liability caps to slightly higher levels than in previous years. The more frequent use of closing balance sheet adjustment mechanism compared to locked-box mechanism indicate that buyers have become more cautious than in previous years. The number of transactions that started as controlled auctions remained historically high. However, in particular in 2H19 we saw a number of processes which failed to cross the line because sellers could not find buyers willing to pay prices on the basis of the same valuation levels.
Background and scope: Our M&A deal terms study covers share purchase agreements negotiated by Vinge during the period between 2009 and 2019 with focus on transactions reported to Mergermarket (i.e. >USD 5 million), excluding real estate transactions, stock market transactions and public takeovers, investment agreements and agreements not subject to Swedish law. The 2019 review includes 75 agreements.
If you are interested in a full presentation of our most recent Deal Terms Study please contact any of the below.
Anna Edström, Partner, Malmö
Jonas Bergström, Partner, Stockholm
Magnus Pauli, Partner, Gothenburg
Matthias Pannier, Partner, Stockholm
Private M&A 2020 - Getting The Deal Through: For more detailed information on Swedish Private M&A, please also refer to our Lexology Getting The Deal Through chapter on Sweden (pdf)