Corporate Transaction Trends

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1 No. of transactions Corporate Transaction Trends Transaction Advisory Services Transactions by Sweden s largest companies Positive start to 2015 driven by upturn in divestments a quarterly publication that aims to identify trends in the level and direction of transactions completed by Sweden s largest companies reports a positive start to transaction activity in The LTM number of completed transactions (166) is 12% higher than one year ago but increased only slightly compared to the previous quarter as the decrease in acquisitions offset the increase in divestments. During Q1 2015, large Swedish companies completed 39 transactions, or one more than in the first quarter of However, the total number of deals decreased by 22% compared to the extremely strong previous quarter. The year on year increase in transaction activity was driven by a continuation of the significant upturn in divestments in the final quarter of The number of completed divestments (13) in Q represents a 63% increase compared to the level one year ago, while the number of acquisitions (26) decreased by 13% compared to Q The continuing positive momentum in transaction activity is supported by a relatively strong pipeline of announced but not yet completed transactions. We therefore maintain our forecast that full year transaction activity in 2015 could reach around 180 completed deals. An increasing level of transaction activity is further supported by EY s most recent Global Capital Confidence Barometer, which indicates that M&A appetite is at a five year high with 56% of global companies intending to make an acquisition in the next 12 months. Rolling last twelve months (LTM) transactions Q1 '08 Q1 '09 Q1 '10 Q1 '11 Q1 '12 Q1 '13 Q1 '14 Q1 '15 LTM no. of transactions LTM no. of aquisitions LTM no. of divestments

2 No. of divestments No. of acquisitions Quarterly data Year on year quarterly acquisitions Q1 Q2 Q3 Q4 FY12 FY13 FY14 FY15 Year on year quarterly divestments Q1 Q2 Q3 Q4 FY12 FY13 FY14 FY Ranked by Enterprise Value, AB Volvo s long-running acquisition of 45% of the Chinese truck manufacturer Dongfeng Commercial Vehicles and ICA Gruppen s acquisition of Apotek Hjärtat were the largest transactions completed in Q The largest completed divestment was Vattenfall s sale of the Fyn Power Station in Denmark. Other notable divestments included SSAB s sales of businesses required by the European Commission in connection with its approval for the acquisition of Rautaruukki in The region accounted for 85% of the divestments and 50% of the acquisitions completed in Q However, the share of total acquisitions in the US continued to decline to 11% in the quarter. Manufacturing and construction was the most active industry sector representing 50% of total acquisitions completed in Q Basic industries and Finance and real estate were the next most active sectors. Q largest transactions (ranked by Enterprise Value) Date Target Seller Buyer Enterprise Target Value ( 100% ) Turnover Acquisitions M M 2015/01 Dongfeng Commercial Vehicles (45%) Dongfeng Motor Group Volvo 1,493 4, /01 Apotek Hjärtat Altor ICA Gruppen /03 Branded respiratory business 1 Actavis AstraZeneca /03 Fyn Power Station Vattenfall Fjernvarme Fyn 148 n.a. 2015/01 Modular Group (65%) Kungsleden Inter IKEA Investment /02 Network Norway TeliaSonera ICE 64 n.a. 1 US & Canada Sources: Press releases and latest available financial reports 2

3 Size and sector LTM and by size Acquisitions Target Turnover Q2'14 Q3'14 Q4'14 Q1'15 LTM 2014 under M M over M Total Target Turnover Q2'14 Q3'14 Q4'14 Q1'15 LTM 2014 under M M over M Total Q and LTM by industry sector and size Target Turnover Q1'15 LTM Industry sector Band Acquisitions Acquisitions Basic industries under M M over M Manufacturing and construction under M M over M Retail and consumer goods under M M over M Finance and real estate under M M over M Healthcare under M M over M TMT under M M over M Services under M M over M Total under M M over M Total

4 Geographic region Q by geographic region Acquisitions Asia (excl Japan) 8% RoW 8% 15% US 11% 50% 23% 85% LTM by geographic region Acquisitions Asia (excl Americas Japan) (excl US) 7% 8% E Europe 1% US 14% 28% RoW 4% 38% E Europe 7% US 11% 13% RoW 5% 64% 4

5 Hot Topic Hot Topic Capital confidence barometer Pär-Ola Hansson Deputy leader EMEIA Transaction Advisory Services Tel Mobile The M&A market is primed for further growth as deal appetite hits a five year high with 56% of global companies intending to make an acquisition in the next 12 months according to EY s 12th Global Capital Confidence Barometer, a bi-annual survey of more than 1,600 senior executives of large companies in 54 countries and across industry sectors, in April Almost half of companies (47%) intend to complete more transactions in the next year than in the past 12 months, and the number of deals in the current pipeline is up 19% on the level 12 months ago. The survey reveals three main reasons for the sharp increase in deal-making intentions. First, economic divergence fuelled by commodity price and currency fluctuations is accelerating crossborder M&A. Second, disruptive innovation is driving inorganic growth strategies at every level of enterprise. Finally, there is the impact of new entrants and companies returning to the transactions market after a period of inactivity. Notably, 78% of companies have changed their M&A strategy as a result of the increased deal activity in 2014, while virtually all respondents (98%) expect the deal market to improve or remain at current robust levels in the next 12 months. Confidence in the global economy is soaring, with 83% of executives feeling optimistic, up from 53% just six months ago. However, 37% of respondents perceive global and regional political instability as the biggest risk to their business, while more than a third cite volatile commodity prices and currencies as another significant risk. Cross-border deals are being targeted by 84% of executives. Companies plan to invest most of their acquisition capital in developed markets for nearterm growth, while interest in emerging markets is expected to remain muted in the short term. The UK, China, the US, Germany and Australia are the top five destinations of choice for investors. In addition to new geographies, many executives are thinking of expanding into new sectors. Almost three quarters (73%) of those planning to do deals are looking at innovative investments. They are focusing on acquisitions that will help them shift the scope of their business sometimes into a new industry sector. Disruption and blurring of sector lines is seeing many companies anticipate future challenges to their business models. Acquisitions are seen as a primary vehicle to accelerate their response often by buying their future competition. The search for innovation, intellectual property and brands will drive activity within and across many sectors. The industry sectors with the highest levels of acquisitive intent are technology, automotive, consumer products, diversified industrials and financial services. Deal fundamentals are also conducive to transaction activity. The valuation gap between the price buyers are willing to pay and sellers will accept for assets remains stable with 78% of respondents foreseeing no change in the next three months. Almost three quarters (73%) are confident in the availability of credit. 5

6 Transaction Advisory Services Contacts Jesper Almström Head of Transaction Advisory Services, Transaction Support Jens Dellensjö Transaction Support Staffan Ekström M&A Advisory Staffan Folin M&A Advisory Björn Gustafsson Valuation & Business Modelling Henrik Eriksson Operational Transaction Services Kristin Ringland Commercial Advisory Services Kristoffer Ståhlbröst Restructuring Carsten Kuhlmann Transaction Tax Transaction Advisory Services provides professional advice in connection with acquisitions, divestments, financing, restructuring and other transactions. Our services include M&A advice, restructuring advice (including advice on working capital management), valuations and business modelling, transaction support (including financial due diligence), operational transaction services (including operational due diligence and integration services) and transaction tax services. Transactions covered in this publication are transactions completed by large Swedish companies, defined to mean (i) companies which are listed on the Stockholm Stock Exchange and have a market capitalization over MSEK 5,000; and (ii) other Swedish companies with a turnover of more than MSEK 10,000. Swedish companies that are controlled by foreign groups have been excluded, unless they are headquartered in Sweden. Only transactions completed or declared unconditional in the period with an estimated deal value over approximately 50 MSEK and which have resulted in a change of control or significant change of influence have been included. If large Swedish companies are present on both sides of the same transaction, the transaction is recorded as an acquisition. Public takeovers by third parties and demergers are recorded as divestments. EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organisation and / or one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. About EY s Transaction Advisory Services How you manage your capital agenda today will define your competitive position tomorrow. We work with clients to create social and economic value by helping them make better, more informed decisions about strategically managing capital and transactions in fast-changing markets. Whether you re preserving, optimising, raising or investing capital, EY s Transaction Advisory Services combine a unique set of skills, insight and experience to deliver focused advice. We help you drive competitive advantage and increased returns through improved decisions across all aspects of your capital agenda. For more information about our organisation and our services, please visit This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. Ernst & Young AB accepts no responsibility for any loss arising from any action taken or not taken by anyone using the material in this publication. For further enquiries, or to add your name to the mailing list for this publication, please send an to transactions@se.ey.com Ernst & Young AB. All Rights Reserved.