Sweden: Horizon Scanning M&A Trends In Scandinavia: What Will Shape 2024?

Global M&A activity in 2023 was the lowest in 10 years, with a nearly 50% decrease from the peak in 2021. Similar trends were observed in the Nordics, which, however, proved surprisingly resilient and exceeded many analysts' expectations. Overall, there is reason to be cautiously optimistic for 2024 and to predict a strong ending of the year.

These are some of the themes expected to shape deal-making over the next 12 months.

Gradual rebound during 2024 with a strong second half

Low activity in private equity (PE) and institutionally driven M&A in 2023 has set the stage for an upswing in sentiment in 2024.

As M&A volumes inevitably stabilise, the market comes to terms with "higher for longer" interest rates, and the institutional leverage loan market cautiously glances at financing M&A again, increased activity across the board is anticipated. With funds' excess dry powder accumulating due to lower activity in previous years, there is growing pressure on PE to increase activity, while generally low returns to investors in recent years are increasing pressure on them to monetise their portfolios.

Alongside a stabilising market for corporate buyers and increased opportunities in strategic acquisitions, the stage is cautiously set for the next M&A boom in late 2024 and beyond, hopefully not to be stifled by regulatory barriers such as increased control over foreign investments and capital in Sweden and Denmark (among others).

AI, data and energy transformation will be strong themes

From a sector perspective, trends in AI and data management will be at the forefront of the tech sector's resurgence in 2024, as will energy transformation and ESG.

ChatGPT was launched at the end of November 2022, and 2023 was the year when AI's poster child took AI from a buzzword to an everyday reality for the general public. As companies have had the chance to experience AI firsthand over the last year, together with the digitisation prompted by the change in working patterns necessitated by Covid-19, 2024 has all the preconditions for the initial adoption of AI on a broad scale.

In the Nordic region, which has historically been strong in tech, there will be a plethora of opportunities in AI, quality data management and energy transformation. However, the question remains about how the EU's attempts to regulate AI will either make or break these opportunities, as we advise actors across the board to stay on top of regulations.

Proactive sellers will be rewarded

Despite high expectations, the beginning of the year still bears the signs of a buyer's market.

Buyers are expected to start the year with a slightly more conservative approach to acquisitions than we have become accustomed to in the period from 2018 to 2022. This will likely result in increased caution and decreased risk appetite during due diligence processes, requiring a proactive approach from sellers.

Sellers who address issues early, keep their houses in order, and drive the narrative will be rewarded in a market that is slowly thawing. Robust companies with solid business models will prove resilient and continue to be seen as attractive investments.

Financing constraints

Financing market constraints are still being caused by the increased cost of capital. For this reason, investors remain risk-averse as financing of deals have become more challenging. However, there is a significant amount of private capital available and private credit has now become a mainstream alternative to the traditional sources of financing.

Although interest rates are coming down, funds and corporates with cash on their balance sheet and no debt requirement can dominate M&A processes.