Norway and Sweden: Fresh perspectives

Sweden’s M&A activity is starting to roll again, kick-started by two major deals this summer, while in Norway thoughts are turning to life after oil

Norway and Sweden not only ride high in the happiness world rankings, they are also regarded as cosy destinations in financially stormy times. But dark clouds are not so far off as they might appear.

In Sweden, despite the economy slowing sharply, confidence is on the up, but in Norway a certain scepticism has developed. A new government has come to power and many are asking – what happens when the oil eventually runs out?

Norway: slick-witted

Norway has been a largely secluded economy living in a bubble kept buoyant by oil reserves since the 1970s. However, with oil prices declining, a weakening in the value of the Norwegian kroner, a potential rise in interest rates and growth outside oil and shipping slowing to a near standstill in the second quarter of this year, the underlying health of the economy is being questioned. With heavy state involvement there has been little government incentive to develop and encourage new private sector industries, in contrast with Nordic neighbours Sweden and Finland. Indeed, in 2012 only 20 per cent of investment was in land-based industries – the rest was offshore.


In the September elections a right-wing coalition swept to power, defeating Jens Stoltenberg’s Labour government. Stoltenberg had led the country for eight years, overseeing an era of financial stability characterised by low unemployment, high wages and a considerable increase in the size of Norway’s sovereign wealth fund, even as the global economy has struggled and the eurozone has battled through a debt crisis.

“In terms of investment levels we may have reached a peak,” warns Sverre Tyrhaug, managing partner of Thommessen, who sees investment in the oil and gas industry as at an “historic record level”.

He adds: “An important discussion point [during the election] was what we do when investment levels go down […], but there’s no answer to that. This also affects the Norwegian welfare system. How can we fund that when the oil money no longer flows in?”

From a law firm perspective, Tyrhaug says it is still more about strengthening oil and gas and renewable energy teams while ensuring that the firm remains full-service “with a lot of legs to stand on.”

“Those leaving office may in a few years look back and think it was perfect timing,” comments Paul Bellamy, managing director at Schjødt, talking about the election result. “Everything’s gone like a rocket for many years, driven by the oil and gas sector and then the oil services sector. But in the past few months there has been a much clearer recognition that there are some challenges and we must do something – but what we are to do, people don’t agree on.”

Peter Brechan, partner at Haavind, agrees.

“The new government must show some initiative and kick-start the rest of the economy one way or another,” he says. “The voters have a lot of expectations in respect of services offered in their schools, healthcare and the care of the elderly which they feel are at a standstill or going backwards.”

Wealth and efficiency

The huge financial reserves held in the sovereign wealth fund, that part of Norway’s income from oil and gas invested outside Norway, could be crucial when it comes to fulfilling those expectations.

At the moment the fund, which it is estimated will be worth £600bn by 2020, can only invest in equities, bonds and property. Holding 1 per cent of the world’s shares and more than 2 per cent of all listed companies in Europe, its property holdings include a 25 per cent stake in London’s Regent Street. The hope is that more oil income will be spent at home.

“Norway has a problem with health queues, bad roads and poor infrastructure,” observes Bellamy. “Lots of things in Norway don’t work as well as you’d think for such a rich country, so some politicians and a lot of voters feel we should be spending more money on ourselves and not investing in property on Regent Street and German motorways – what about building motorways in Norway?”

Infrastructure improvements could be led by public-private partnerships (PPPs), something the new government is in favour of.

“They don’t have the same rigid attitude to privatisation that the previous government had,” adds Bellamy, “so PPP could be an area to watch as it has been effectively banned in Norway for the past eight years.”

But is there a need for PPPs when Norway does not have any borrowing needs and has cash on account?

“It would make things more efficient; construction or infrastructure projects would be handled in a more effective manner,” says Tyrhaug. “If you have private sector people involved there’s more incentive to deliver on time, [with better] quality and so on.”

Sweden: M&A perks up


In Sweden, a difficult 2012 for M&A and a 20 per cent drop in deal activity in the first half of 2013 was followed this summer by a more confident mood inspired by two big deals. Papermaker Svenska Cellulosa made an £890m bid for Chinese tissue company Vinda, while engineering specialist SKF agreed to buy US supplier Kaydon for £780m.

“The fundamentals of a good market are there,” observes Maria-Pia Hope, managing partner at Vinge. “Quite a few corporations are cash-rich and need to make structured deals to grow turnover. Similarly, the private equity sector has a lot of portfolio companies that are ripe for exit.”

Mannheimer Swartling managing partner Jan Dernestam says: “There’s a more positive attitude. People are not sure how many deals are going to go to closing but there’s a good pipeline. People are tired of being negative and when SKF – a blue-chip company based in Gothenburg and one of Sweden’s oldest companies, well-run and solid – shows the confidence to do such a large cross-border deal you shouldn’t underestimate the psychological effect in the market.”

A hoped-for result of such deal activity is that it will provoke the huge Swedish private equity (PE) houses such as Nordic Capital, EQT Partners and IK Investment Partners, into coming out of their comparative hiatus.

“A couple are raising funds in the market,” discloses Mikael Smedeby, managing partner at Lindahl. “That’s a good sign for the M&A market. We’re seeing some movement in the life sciences and TMT sectors. And also in energy.”

Northern lights

Similar issues abound in Norway.

“At some point the PE houses have to sell what they have,” points out Susanne Munch Thore, managing partner of Wikborg Rein. “They can’t just wait for ages – some have to buy and there have been PE houses that have established new funds.”

A recent Norwegian Venture Capital & Private Equity Association report on the first half of 2013 shows 35 divestments in Norwegian enterprises by Norwegian and foreign PE houses, up from 16 in the second half of 2012.

A glimpse of brighter skies has also been seen in Sweden, where IPO mandates are on the up.

“IPOs have been few and far between in the past year,” says Hope. “We’re now seeing an increase in interest in taking companies onto the stock exchange, a sign that underlying confidence is returning.”

The popular Nordic bond markets have also continued to evolve. No longer confined to large multinationals, companies previously thought too small for a bond issue are entering the market.

“What’s happening now is a more mid-sized market, sometimes with issuances of less than €50m,” says Dernestam. “There are also new types of investors who see this as a good way of investing […] such as pension funds that may not be allowed to invest in a syndicated loan, but may be allowed to buy bonds in the open market.”

And evolution is also in evidence in the legal market itself. In January Simonsen and Vogt & Wiig merged to form a firm with 180 lawyers and offices in Norway and Singapore.

“There will be more mergers in the second tier,” predicts Bellamy. “In the middle it’s not easy so some try to become big by merging. Of course, the challenge is that you may get a bigger firm but not necessarily a better one.”

“It was a sensible merger,” opines Thore. “They have various strengths and complement each other well. It won’t be as easy for others to find merger partners that complement each other so well.”

Lawyers on the move

While Sweden may be seeing little in the way of consolidation, the market for laterals has definitely arrived. Most recently Vinge hired IP specialist Ulf Dahlgren from Lindahl, following the arrival of Håkan Borgenhäll from Lindahl in April.

“It started when Roschier and Hannes Snellman launched with a view to establishing a Nordic firm with a strong presence in Sweden,” says Smedeby. “They hand-picked people from other firms and started the trend of people moving around among established firms.”

Strides are also being made in law firm management, with Schjødt, under the leadership of Bellamy, “revamping and redeveloping a process for tender proposals”.

Meanwhile, at Wiersholm, managing partner Nils Thommessen says the firm is professionalising as its clients are.

“It boils down to cost control and operational issues such as how many staff members we have and how they are organised, as well as ascertaining that we’re managing the projects we do in the most efficient and commercial manner possible,” says Thommessen. “The market will see a drift away from unqualified staff and towards more professional support staff as our lawyers require a different type of support than they did in the past.”

Thommessen says his firm wants people with MBAs who can help initiate change processes, and people with accountancy and higher degrees from universities to work with the marketing as well as the financial teams to make analyses of markets and competitors. “The support role needed has changed from writing up big memos to business development, pricing, organisational and operational issues,” he adds.

Apart from it being “common sense and good logic”, reasons Thommessen, “we see how much neighbouring jurisdictions have been struggling in recent years and we’re under no illusion that we’re not going to be hit by the same things – we also see how UK firms are developing and are getting inspiration from that”.


Key facts: Sweden

GDP (2012): $526bn

Inflation (Sep 2012): 0.1%

Population: 9.5m

Life expectancy at birth: 82

Unemployment rate (Sep 2013): 7.5%

Source: World Bank, Statistics Sweden

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