Is M&A here to stay?

Welcome to the last edition of this year of KPMG’s Nordic Deal Trend Report with figures covering deal activity in the fourth and final quarter of 2021.

As we concluded in our most recent Nordic Deal Trend Report covering Q3 2021, the first three quarters alone surpassed the entire previous year 2020 with regards to number of announced deals in our part of the world. This final quarter of 2021 has, more or less, just been additional icing on the cake with regards to Nordic M&A activity. In total for 2021 (at the time of writing this report and before all announced deals have been captured in the statistics), 2,150 deals have been announced demonstrating a 44.7% increase year on year across the Nordics.

What we do note, however, is that the figures show a slowdown of announced deals going into 2022. The number of announced deals in the fourth quarter stands at 302 which is a little less than half of the average of the first three quarters of the year.

Sector breakdown Q4'21 (outer ring) vs. Q4'20 (center ring)

sector comparison donut

So what does this mean – are we witnesses to the M&A market starting to hold back over worries of increasing inflation and interest rates, supply-chain issues or general growth concerns due to the new epidemic wave? Or could the explanation point in the direction of a capacity constraint to doing deals rather than a lacking appetite?

What we see and hear from the Danish market and when talking to colleagues across the rest of the Nordics, almost everyone involved in the doing M&A is still flat out. Based on our own pipeline of ongoing and upcoming deals that we expect to materialize in the first quarters of the new year, there are no major signs of a Nordic deal market coming to a halt.

As touched upon earlier in the year, the most consistent industry trend encompassing deals in the transformational digital technology is still very much present in the underlying statistics with the tech segment totalling 26% of all announced deals. Expectedly, together with consolidation trends in manufacturing, consumer, services and an active real-estate market, the M&A activity levels of today will carry over to the new year.

Also worth noting is the ESG agenda which started pre-pandemic. This may generate additional deal activity as organisations look at their ecological footprint and consider acquiring, rationalising or divestment of assets. Looking ahead, I would expect investors to perceive ESG as a critical element to building a more sustainable business that is better suited to adapt to potential shifts in the market.

We believe M&A is here to stay.

Happy New Year's!