q2 deal volume well above seasonal average · record number of 45 set in q2 2016. in terms of...
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Transaction Advisory Services
Transaction TrendsNorwegian M&A update – Q2 2018
Q2 deal volume well above seasonal average
Transaction Trends, published by EY Transaction Advisory Services, is a quarterly publication that aims to identify trends in the Norwegian transactions market. Data presented in this newsletter cover all transactions where the 500 largest companies in Norway have participated as either target, buyer or vendor. This makes Transaction Trends the most comprehensive transaction newsletter available for the Norwegian market.
Also in this edition:
Number of transactionsSource: Mergermarket* Transactions where buyer, seller and/or target is listed or have a parent company that is listed
During the second quarter of 2018, the
500 largest Norwegian companies
announced a total of 42 transactions. This
represents a spike in deal volume
compared to the 28 transactions observed
in the first quarter of 2018. Q2 deal
volume is stronger than the average
observed since 2010, but behind the
record number of 45 set in Q2 2016. In
terms of activity by industry, Engineering
& Industrial Products had the highest deal
activity (12 deals), whilst consumer
products came in second (9 deals).
Global deal volumes have been strong so
far in 2018, with accumulated global deal
value exceeding that of H1 2017 by more
than 25%. The incentive for M&A among
the 500 largest Norwegian companies is
expected to remain strong due to high
global GDP growth (forecasted by IMF to
3.9% in 2018 and 2019), a high and
relatively stable oil price, and strong
public markets. Increased protectionism,
on the other hand, could affect some
cross border deal activity.
In this issue, we have included a
summary of EY’s Digital Deal Economy
Study. Appetite for digital capability
acquisitions is stronger than ever, and
this article aims to teach you how your
company can aspire to lead in the digital
deal economy.
► EY’s Digital Deal Economy Study 2018
9
9
19
24
9
5
20
10
8
1
22
0
0
Last Twelve Months Number of Transactions by IndustrySource: Mergermarket
Automotive & Transportation
Business & Prof. Services
Consumer Products
Financial Services
Government & Public sector
Power & Utilities
Real Estate
TMT
Travel, Leisure & Tourism
Oil & Gas
18 1724 18
2816 17 13 15 10
18 1325
12 14
28
15
17
22 2318 16
12
26
15
17
0
50
100
150
200
0
10
20
30
40
50
60
4Q16
3138
2Q164Q153Q15
LTM
1Q162Q15 3Q16 1Q17 2Q17 3Q17 4Q17
45
1Q18
40
2Q18
30 31
52
33 31
22
44
28
42
Public* LTMPrivate
Engineering & Ind. Products
Life Sciences
Retail
On 27 April, DNB acquired Nille, the Norway based retail chain
operator, from BC Partners Limited, the UK based private
equity firm. DNB acquired Nille to save the company from
bankruptcy and at the same time secure their own loans. Nille
has over 360 stores with a total of 2000 employees in
Norway, however Swedish stores have been discontinued.
DNB hopes to divest Nille within three years.
On 25 May, China-based QuMei Home Furnishings Group
confirmed its tender to buy all shares in Ekornes, a Norway
based and listed furniture manufacturer. Upon announcement,
25.7% of Ekornes’ share capital had already approved QuMei’s
undertaking. The transaction is valued at USD 696 million and
has been recommended by the board.
On 15 June, a merger between Scala Retail Property and
Salto Eiendom was announced. The combined company, Scala
Eiendom, will own 20 shopping centres with 250,000 square
meters of lettable area and some NOK 450m of rental income,
making it the fourth largest shopping centre company in
Norway. Scala Eiendom wishes to participate actively in the
further consolidation of the Norwegian shopping centre
market, focusing on management and development of medium
sized shopping centres.
On 3 May, Oceanwood Capital Management agreed to acquire
Norske Skogindustrier ASA. The deal is valued at USD 488
million, which allows a recovery of approximately 69% of the
outstanding debt to the holders of senior secured notes due in
2019, as well as recovery of a smaller liquidity facility. As a
result of the acquisition, the overall debt level and cash flow of
the company will be significantly improved.
Key highlights and market outlook
On 10 March, the private equity arm of Ontario Teachers
Pension Plan, Teachers’ Private Capital, agreed to sell Helly
Hansen to the Canada-based retail company, Canadian Tire
Corporation. Under the terms of the agreement, Canadian Tire
Corporation will pay a consideration of USD 763 million.
According to the CEO of Helly Hansen, Paul Stoneham, the
acquisition will strengthen Helly Hansen’s position in Canada,
as well as the company’s international growth prospects. The
headquarters of Helly Hansen will remain in Oslo.
2 | Transaction Trends 3rd edition 2018
Top transactions last quarter (by deal value, USDm)Source: Mergermarket
Ann. Date Target Vendor BuyerDeal Dom.Industry
DealValue*
TargetTurnover
May 10th
Helly Hansen AS Teachers’ Private CapitalCanadian Tire Corporation, Limited
Consumer Products USD 763m USD 354m
May 25th
Ekornes ASA Qumei Investment AS Consumer Products USD 696m USD 376m
May 29th
Nelja Energia ASVardar AS; Martin Kruus(private investor); KalleKiigske (private investor)
Enefit Green AS Power & Utilities USD 570m USD 69m
May 3rd
Norske Skogindustrier ASAOceanwood Capital ManagementLimited
Engineering & Industrial Products
USD 488mUSD
1,507m
May 18th Saferoad Holding ASA (70.78%
stake)FSN Capital Partners AS
Engineering & Industrial Products
USD 288m USD 738m
*Mergermarket definition
Over the last twelve month (“LTM”) period, the 500 largest companies in Norway announced a total of 136 deals. This represents a slight increase compared to the LTM levels observed in the previous three quarters. Deal activity is still somewhat behind the record levels observed in 2016 (~160 deals). Engineering and industrial products have been the hottest sector so far in 2018 (17 deals), while consumer products is ranking second (12 deals).
We remain optimistic about M&A activity in the second half of 2018. Our take is that the deal pipeline is robust, and that the overall appetite for deal-making is strong. Even though trade wars and protectionism could threaten cross-border deal activity, we posit that macroeconomic drivers (growth in global GDP, technological innovation, large cash reserves and availability of credit) will prevail in supporting overall deal activity in the coming quarters.
Transaction TypeSource: Mergermarket
Buyer RegionSource: Mergermarket
Activity Breakdown
In the second quarter of 2018, Norwegian buyers accounted
for 62% of total transactions. This represents a decrease
compared to the first quarter of 2018 (71% Norwegian
buyers). It is also below the average levels observed in the
last twelve months (64% Norwegian buyers). The composition
amongst buyers outside of Norway is similar to the levels
observed in the LTM period for the Americas and Asia-Pacific,
while the share of Nordic and European buyers is 4 p.p. lower
in Q2 compared to LTM average levels.
The share of domestic deals was higher in the second quarter
of 2018 (43%) compared to the first quarter of 2018 (29%). It
is also above the trend observed for the last twelve months.
The top 5 transactions in the second quarter of 2018 were all
cross border. Among these, 4 of the deals comprised a
foreign buyer.
62%
19%
7%
5%
7%0%
Norway
Nordics (excl. Norway)
Europe (excl. Nordics)
Asia-Pacific
Americas
Other
LTM
64%
15%
11%
4%
6%0%
Q2 2018
43%
38%
46%
57%
63%
54%
Cross BorderDomestic
LTM
2008 - 2018
Q2 2018
Activity by industrySource: Mergermarket
Number of Transactions
Industry Q2 2018 LTM 2017 Avg. 2008 – 2017 Trend indicator
Automotive & Transportation 1 9 13 7
Business & Professional Services 0 9 11 9
Consumer Products 9 19 16 13
Engineering & Industrial Products 12 24 12 22
Financial Services 1 9 8 7
Government, Public sector & Organisations 0 0 1 0
Life Sciences 3 5 2 4
Oil & Gas 4 20 15 16
Power & Utilities 4 10 12 9
Real Estate, Hospitality & Construction 1 8 11 9
Retail 1 1 1 7
TMT 6 22 24 24
Travel, Leisure & Tourism 0 0 2 3
Total 42 136 128 129
Transaction Trends 3rd edition 2018 | 3
5%
Transaction ArenaSource: Mergermarket
4%
The share of Norwegian targets increased from 54% in the
first quarter of 2018, to 71% in the second quarter. The
amount of domestic targets for the LTM period is now at 63%
- the highest level observed since full year 2016.
We also observe a 4 p.p. growth in the share of Nordic
targets, while the frequency of investment in European,
American and Asian targets was notably lower than the trend
observed over the LTM period.
Taking a slightly longer perspective, we observe that overall
deal flow between Norway and the Americas is low compared
to historical levels. We find that the share of American buyers
has retracted from an average level of 10% from 2014 to the
second quarter of 2017, to a level of 4% in the LTM period.
The dampened interest from American buyers could provide
some explanation as to why we are observing lower deal
volumes in the current LTM period, compared to what we
observed from 2014 to 2017.
4 | Transaction Trends 3rd edition 2018
Target RegionSource: Mergermarket
Activity Breakdown
71%
19%
5%
2%2%0%
Nordics (excl. Norway)
Norway
Europe (excl. Nordics)
Americas
Asia-Pacific
Other
Q2 2018
63%
15%
12%
6%
4%1%
LTM
40%
51%
49%
60%
49%
51%
Public Private
LTM
2008 - 2017
Q2 2018
17
21
18
26
5
23
10
16
Q118Q317 Q417 Q218
USD 0-100 m
> USD 100 m
Deal value by range (est.) Source: Mergermarket & EY
Average deal size (est.) Source: Mergermarket & EY
1063 450
561
299
Q118Q317 Q417
1063
Q218
Public Market Update
Oslo Stock Exchange (“OSE”) saw four new listings in the first
quarter of 2018, while Oslo Axess had no new listings. Three
of the new listings on OSE were transfers from Oslo Axess. The
companies transferred were PCI Biotech Holding, MPC
Container Ships and Magseis. The only listing with no prior
history at OSE was Shelf Drilling.
The amount of equity capital raised thus far in 2018 continues
to be strong. As at closing of the second quarter, the total
amount of equity raised is only just shy of the levels raised in
full year 2016. The most notable issues in terms of equity
raised were made by Shelf Drilling (NOK 1.8 billion) and Odfjell
Drilling (NOK 1.4 billion).
After a bumpy first quarter of 2018, the Oslo Stock Exchange
Benchmark Index rose to a new all time high in the second
quarter of 2018 (828 points), and closed in at 814 points - an
increase of 9.5% compared to year-end 2017. The uptick on
OSE can largely be attributed to energy related stocks
(comprising ~40% of OSE market cap), which in turn is driven
by a continued increase in the price of oil.
New listings Source: Oslo Stock Exchange
4
7
3 3
7
8
12
12
8
15
7
20
4
8
12
16
20
2012 2015
1
2014
15
2013
19
2016 2017
1
YTD18
8
12
10
18
8
Oslo Stock Exchange
Oslo Axess
Issues by value, Oslo Stock Exchange & Oslo AxessSource: Oslo Stock Exchange
Avg. OBX multiples Source: S&P Capital IQ
Foreign exchange rates (indexed) Source: Norges Bank*Trade Weighted Index
Transaction Trends 3rd edition 2018 | 5
5%4%0
5
10
15
20
25
30
35
40
45
50
20172016
NOKb
201520132012 2014 YTD18
18.520.1
27.5 27.3 27.7
48.3
26.9
Private Employee
Public
IPO
Repair
16,0P/E
EV/EBITDA6,1
P/B
6,46,5
4,7
2,01,7
1,41,4
20,019,6
13,8
2015
YTD18
2017
2016
OBX Index Source: S&P Capital IQ
0
100
200
300
400
500
600
700
800
900
OBX
Last quarter
LTM Q2 2018
2013 2014 2015 2016 2017 YTD18
5%4%
0,9
0,5
0,8
0,6
0,7
1,0
1,1
EUR/NOK
GBP/NOK
TWI*
SEK/NOK
USD/NOK
2012 2013 2014 2015 2016
LTM 2018
How can you aspire to lead in the digital economy?
Forging a successful digital future will likely mean acquiring capabilities outside, in addition to building them in-house. Today, investors are prepared to reward companies that make bold technology- and transformational acquisitions. Digital M&A is defined by the key process and new ways in which digital capabilities are built through M&A. In the future, only those who can execute digital M&A over a sustained period will be equipped to prosper.
EY’s second Digital Deal Economy Study, a survey of more than 900 executives, find that companies are increasingly embracing the digital imperative. No surprise there, given that digital technologies and applications are continuously reinventing and reshaping industry landscapes and business models.
In our survey, 90% of companies are elevating digital priorities in their strategic planning over the next two years. Meanwhile, many companies find it challenging to build an effective approach to fully realize their digital potential.
Companies that merely put digital wrappers around their existing brands and propositions may find their future under threat. Digital disruption is forcing companies to ask hard questions about what their organization is today, and what it needs to become tomorrow. The ability to innovate rapidly and continuously will be critical for companies in the time ahead.
We find clear differences in how competent companies are attransforming strategic thinking into digital M&A capabilities and outcomes. Many companies excel only in one of seven areas of digital M&A. There is also great variance between those who embrace the opportunities of digital transformation - who lead at digital M&A - and those who are still learning. Only 14% of respondents are so called “leaders” – companies who possess robust digital M&A capabilities.
To succeed in the new digital world is not just a one-off sprint. It is acontinuous race to stay ahead of shifting customer demands and everchanging landscapes. The forces and technologies driving this change are also those that can be best harnessed to navigate them. Becoming leaders in the transformational age requires a digital-centric approach to capital strategy, deal-making and processes.
Digital Deal Economy Study
EY’s Digital Deal Economy StudyWith traditional companies facing relentless pressure to drive digital innovation, the ability to design and execute a digital M&A strategy is essential. In 2016, we launched our first Digital Deal Economy study and this latest report provides one of the most detailed comparative studies available.
The survey was conducted between November and December 2017 by Longitude. More than 900 respondents across 26 countries and nine major industries participated. C-suite executives involved in M&A or digital strategy were invited to take part.Respondents were categorized into three distinct groups on the basis of their company’s maturity or preparedness in digital M&A across seven areas of EY’s digital M&A framework.
Read the full report here.
Having a digital ecosystem is essential to fast-tracking innovation …
… and companies are recognizing that digital is a strategic capital allocation priority.
However, many are yet to introduce new deal processes to ensure they can capitalize on digital M&A …
… and value is being eroded through flawed integration strategies.
90%
46%
48%
24%
of companies are making significant investments in building a digital ecosystem.
are considering digital priorities in their capital allocation planning.
say their M&A due diligence processes are not «highly effective» for digital acquisitions.»
just a quarter are «highly confident» about their ability to retain talent following an acquisition.
There are four areas of priority areas in our research, which cover the entire transaction lifecycle. These four areas are: (1) strategy and ecosystem, (2) capital and portfolio review, (3) deal process and (4) integration. Focusing on these areas will help organizations become leaders within their business area. Companies’ ability to simultaneously integrate multiple digitalassets at multiple speeds will be key to deliver value in the time ahead.
Strategy and ecosystem
Capital and portfolio review
Deal process
Integration
Key findings
Transaction Support
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About this publication
Transaction Trends is a quarterly publication that aims to identify trends in the
Norwegian transactions market. Transactions covered in this publication are
public and private transactions announced by the 500 largest Norwegian
companies (DN500), defined as a transaction where either the buyer, target or
vendor company is a Norwegian based company. Public transactions are defined
as transactions where either the buyer, target or vendor company is listed on a
public stock exchange. All other transactions have been classified as private.
Domestic transactions are defined as transactions conducted within a national
boundary, i.e. deals involving two or more incumbent nationals, while cross
border transactions involve companies from at least two different nationalities.
Deal Value is taken as the sum of the consideration paid by the acquirer for the
equity stake in the target plus the value of the net debt in the target, where
applicable. Inclusion of net debt in the deal value will depend on the stake
acquired or the target company type.
Transaction Statistics are based on Mergermarket and EY data. Public market
data are sourced from S&P Capital IQ and Oslo Stock Exchange.
Transaction Trends is published by EY Transaction Advisory Services.
Contact information
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please send an e-mail to [email protected].
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