Spotlight on the Nordics

The pharma, medical & biotech (PMB) sector generated just under EUR 13bn worth of deals in H1 in the Nordics, a more than fourfold increase from the same period last year. Is this performance sustainable?

Louise Rodebjer: Generally, healthcare is a focus in the Nordic region thanks to the strength in innovation in both the bigger companies such as Novo Nordisk, Lundbeck and Astra Zeneca, but also in the smaller companies such as Calliditas and Bioarctic, which both recently delivered significant R&D results. This is something that triggers interest from international buyers and investors in the sector and the region as a whole. That interest is expected to continue throughout the year, however the overall performance for 2024 will likely stabilise at a lower level compared to the fourfold year-on-year increase that the sector enjoyed in H1.

Among key sectors, only real estate avoided a year- on-year decline in deal volume in the Nordics. What forces are propelling dealmaking? Are transactions in particular subsectors, such as logistics, buoying the industry?

Fredrik Råsberg: The high transaction volume in the real estate industry is mainly driven by lower interest rates, stable inflation and better opportunities for financing. It should be noted that the yield levels have increased radically and are now at 2015 levels. Property values have fallen as a result, which makes sellers more likely to accept prices offered by the buyers in the market as they align with the values to a greater extent, and the buyers’ needs for higher dividend yield levels can be met.

It should be noted that foreign capital, which accounted for 25% of deal volume in 2023, has decreased to only 10%. No foreign investor is among the five biggest deals of the year, but two are on the sell-side. American investors have a completely different concern regarding their domestic office market post-pandemic, with home working and high vacancies. Hence, that investor category is cautious with investments in the office segment, in particular. In general, the investors are also cautious with investments in the residential segment, while community properties and logistics properties are more attractive.

Of the 20 largest deals announced in the Nordics in H1, half involved bidders from outside the region. What makes the region especially appealing to cross-border acquirers? What factors should overseas bidders most bear in mind when pursuing M&A in the Nordics?

Louise Rodebjer: The Nordic region is appealing for cross-border M&A due to several factors. First, the region has a very efficient and transparent regulatory environment with well-functioning legal systems. Each Nordic country does, however, apply its own regulatory framework, meaning that local advice in each jurisdiction is necessary. Second, the Nordics continue to be a hub for entrepreneurship and innovation across several industries, from life sciences to heavy engineering and cutting-edge technologies within renewable energy. At the moment, a weak Swedish krona means an attractive relative valuation of these businesses. Third, ESG is high on the agenda in society as a whole and prioritised by companies. There are therefore lots of compelling investment opportunities driven or characterised by ESG, which bidders with an ESG-focus in their M&A strategy will find beneficial.

Finally, from a practical perspective, the Nordics is highly digitalised, and English predominates as the business language across the region, which makes it easier to conduct cross-border deals.

One factor to bear in mind, however, is that in December 2023 the EU foreign direct investment regulations were implemented in Sweden, which adds a layer of complexity already present for investments in Europe in general. It has an impact on the acquisition process for foreign investors in Sweden. The notification process, as in other European countries, must be taken into account when planning an acquisition and will be another reason for transactions to have a deal mechanism with separate signing date and closing date.