M&A in uncertain times
Welcome to the newest edition of KPMG’s Nordic Deal Trend Report covering deal activity in our part of the world in the first quarter of 2022.
Starting off on a positive note, we draw to your attention, once again, that last year proved to be a stellar one for M&A across the Nordics. On average, more than 535 deal were announced each quarter of 2021, summing up the total number of announced deals to 2,150 – this is unprecedented and unlike anything we have ever seen before. Even though COVID-19 now seems to be a thing of the past and all should look bright, we expect last year’s performance will prove difficult to match in the coming three quarters.
Looking at the situation in Ukraine with Russia starting a war on European soil, it is not difficult to deduce that there are worries of increasing inflation and rising interest rates, supply-chain issues and a high level of costs to be covered following the tragic ongoing conflict. However, all negativities taken into consideration, one might be bold to state that we see a strong(ish) start of the year.
Sector breakdown by Deal Count Q1'22
In the first quarter of 2022, 347 deals have been announced. This is a 15% increase compared to the final quarter of 2021. Until now, it seems that that the dealmaking appetite remains keen – not at 2021 levels of course, but still strong(ish) to a certain extent.
It is almost not worth re-iterating but deals in the transformational digital technology still takes top spot looking at composition of deals per industry. The tech segment has increased slightly quarter on quarter and now totals 27% of all announced deals. It will be interesting to see which effect new factors will have on both the future M&A activity level as well as composition of deals per segment.
A new main factor is that, without a doubt, there is an increasing risk of distressed M&A. Both on account of COVID-19 support packages being wound down, fallout from sanctions, increasing energy costs, companies having to re-think their market presence following the escalation of conflict in Ukraine and so on. This list is long…
One challenge after another seems arrive abruptly and the outlook for rest of 2022 is definitely less certain. It remains to be seen how the impact of war, energy costs, supply-chain disruption and reconstruction costs will affect dealmaking appetite across the Nordics.
Jan Hove Sørensen
Partner, Head of Corporate Finance and M&A
KPMG in Denmark