On 17 September, CBS Executive MBA programme hosted an M&A panel discussion in association with Mergermarket, part of Financial Times Group, assessing the status of Danish M&A. Participating panelists came from A.P Møller Maersk, Vestas, Axcel, BDO as well as CBS.
While the increase in deal count may signal that confidence is returning to the market, deal sizes tend to be modest and megadeals are nowhere to be seen. During the first half of 2013, Denmark saw 99 deal announcements compared to 85 in H1 2012, but the total value of these transactions decreased by almost three quarters to €1.3bn compared to €5.4bn last year. None of the deals for the first half of the year exceeded €400m, whereas in H1 2012 the largest deal was valued at €1.7bn. The quantity of deals is a positive sign and M&A panelists hinted at an air of optimism surrounding Danish dealmaking.
“I clearly sense that there is a positive sentiment in the Danish M&A market”, noted Jacob Therkelsen, Head of M&A at BDO and CBS Executive MBA graduate. “Many of the companies we are working with are now experiencing stabile growth and their businesses are running as planned, which supports the perception of the stabile macroeconomic environment that is important for an active M&A market. We see that business leaders now feel more confident and that they are more open to M&A activity than they have been over the last five years. Furthermore, the gap between the sellers’ and the buyers’ value expectations are narrowing.”
CBS Professor and Associate Dean for the Executive MBA Jesper Rangvid, further enhanced the optimistic outlook by stating that the economic environment is indeed looking brighter.
“From a macroeconomic point of view, things clearly look better than just a year ago,” he said. “I believe we will see a somewhat more positive economic environment in Denmark in the coming years, even if we may not see spectacular growth. Denmark is a small open economy, so we are heavily influenced by the rest of the world, and the Eurozone in particular.”
Since we seem to be moving towards better and more active dealmaking times, what deals are on the horizon and what should Danish M&A practitioners look out for?
“Among the larger end of the spectrum, the potential sale of Nets and the refinancing of Scandlines will be ones to watch out for in Denmark during the second half of 2013,” said Kasper Viio, Global Assistant Editor at Mergermarket in London. “There have also been several notable ECM transactions, such as the listing of Matas, Maersk's sale of its 31% stake in DFDS and KKR's disposal of an 11% stake in TDC. With confidence growing again on the IPO market, it is not inconceivable that we will see the return of mid-market IPOs in some Nordic exchanges in the coming six months.”
Outbound investment for Denmark has traditionally been aimed at safer options and the US recovery is encouraging higher deal values to be accumulated, with five deals in H1 2013 overtaking the value seen in the whole of 2012. But with many emerging markets companies being ripe for investment and China, for once, seeking to relax its foreign investment laws in new free trade zones, there are opportunities to be had for companies daring to cast their M&A nets on less traditional and riskier outbound options.
Looking for examples among recent deals, Denmark’s very own brewer Carlsberg announced the second largest ever investment in a Chinese firm by a Danish company on Mergermarket record (since 2001). Carlsberg has been in engaged in the growing beverage market in China for a while now but the deal this year saw the company increase its stake in Chongging Brewery by 30.2% for €461m.
“Emerging markets have been under some pressure recently,” Jesper Rangvid concluded, ”but the latest data indicate that the situation does not look very worrisome. Developments should be followed closely, however, as there are of course differences between one emerging market and another.”