Spotlight on Sweden

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Sweden saw strong levels of dealflow in Q3, but limited access for cross-border buyers and scarcer debt financing continue to pose challenges, says Clearwater International’s Managing Partner Tomas Almgren.

the overall M&A market is doing very well and what we’re seeing is record levels of transactions

Sweden was one of the most active regions in Europe in terms of private equity dealflow in the third quarter of 2020, with the impact of the coronavirus quite low and valuations of some companies on par with pre-pandemic levels. Tomas Almgren, Clearwater managing partner in Sweden, says: “the overall M&A market is doing very well and what we’re seeing is record levels of transactions, especially because of the suppressed demand from March, April, and May.” One of these deals was the sale of a majority stake in Linköping-based company Axentia to PE firm Adelis. The company, a developer and supplier of display systems for public transport, was advised by Clearwater on the transaction.

Sweden was one of the very few countries not to undergo a government-imposed national lockdown, allowing businesses to carry on as usual. Even so, some sectors have clearly outperformed others, and this disparity continued in Q3. Almgren says: “We’re seeing businesses in the consumer sector and e-commerce doing extremely well. Trends such as online shopping have been around for a while but are now seeing a great acceleration. Some niche companies have also remained resilient. Software companies are also performing well, but technology isn’t as dominant in the Swedish industry as it is in some other countries.” Meanwhile, segments where PE firms remain cautious include hospitality, physical retail, leisure and industrials. But Almgren is optimistic, citing auto giants Volvo and Scania, which shut down operations completely earlier in the pandemic but have now ramped up operations.

The third quarter did not reveal a material impact on valuations of Swedish companies, either positive or negative, with resilient companies continuing to fetch prices as high as before. Almgren says: “Valuations have not climbed, because prices for Nordic companies were already so high compared to other regions. But for robust companies that are doing well, the multiples are as favourable as prior to the pandemic.” Conversely, it is unclear in which sectors the multiples are lower, Almgren adds: “We don’t know this yet because companies in sectors with lower multiples won’t come forward at this time unless they’re distressed.”

Valuations have not climbed, because prices for Nordic companies were already so high compared to other regions

An active buy-and-build strategy remained a strong trend in Sweden in Q3. Almgren says: “One of the biggest trends in the Swedish market for a few years has been consolidation. In HVAC for example, this has been going on for quite a few years and will continue.” Recent deals include PE firm Axcel’s acquisition and merger of three installation companies – Ventab, Ventilationsprojekt and Installationsbolaget – to create Currentum, a specialist in heating, ventilation, health and safety, sprinkler systems and building automation, which will be in competition with other major players in the market, including Triton-backed Assemblin, and listed companies Bravida and Instalco.


Not all GPs are experiencing a smooth deal-making process, though. Restrictions on travel faced by GPs travelling to Sweden have made it difficult for buyers outside the EU to be competitive in local sale processes. Access to debt financing has also been a problem for some, as banks have become more careful with lending to buyout funds. However, says Almgren, as bank financing becomes difficult to source, private debt funds and bond financing have become more attractive and are increasingly filling in the funding gap.

Companies in Sweden have so far escaped tough restrictions resulting from the pandemic, but this could change going forward, resulting in more distressed companies and a rise in special situation deals. Almgren says: “If the spread of the virus gets worse and we have a European style lockdown, I think that could cause a rise in special situations. I also think more companies will find themselves in financial difficulties in February when they need to repay deferred taxes to the Government.”

But with a busy pipeline, Almgren is confident that the increased deal activity in Sweden will continue and extend into 2021. Going forward, he expects to see more transactions in areas with disruptive business models that benefit from structural changes accelerated by the COVID-19 pandemic.

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