Presented to DIRF on 27 March 2014 Johannes Vasehus Managing Partner Corporate Finance
Your speaker today Johannes Vasehus Managing Partner Corporate Finance Profile and experience Managing Partner in Deloitte Corporate Finance since 2011 10 years of investment banking experience from Nordea Co-founder of biotechnology and renewable energy startup in Spain MSc in Business Administration and Commercial Law from CBS and Stern, NYU 19 transactions completed in 2 transactions in 2014 YTD Selected Deloitte Corporate Finance references In the sale to In the sale to in the divestment of to in the sale of a majority stake to in the public takeover by in the private placement of shares to in the sale to in the acquisition of and selected weekly newspapers from Deal value: DKK 478,500,000 2014 2014 in the sale of to in the acquisition of in the divestment of to in the acquisition of in the sale of ISS Document A/S to in the sale to Undisclosed in the sale to in the sale of in the sale of AREPA IT Service to in the sale to in the acquisition of ITW Wiremesh from in the sale to in the sale of Byggeriets Forsikringsservice to in the sale to Invest 2012 2012 2012 2012 2012 1
Nordic M&A market statistics country by country Danish, Swedish, Norwegian and Finish M&A transactions (2006-) 166 256 Avg. Avg. -27.6% +1.1% 305 312 276 268 272 272 181 174 189 191 197 171 160 140 142 118 '06 '07 '08 '09 '10 '11 '12 '13 '06 '07 '08 '09 '10 '11 '12 '13 161 127 Avg. Avg. -15.0% 197 170 193 200 +12.7% 170 152 149 154 124 138 104 104 107 118 133 90 '06 '07 '08 '09 '10 '11 '12 '13 '06 '07 '08 '09 '10 '11 '12 '13 M&A market in significantly above historical average Private equity involved in approx. 25% of Danish deals Sweden 25% below historical average Norway and Finland in line with historical average Strategic vs. financial buyers 85% 88% 84% 77% 77% 79% 79% 83% 82% 87% 89% 85% 81% 78% 85% 85% 15% 13% 16% 23% 23% 21% 21% 17% 18% 13% 11% 15% 19% 22% 15% 15% 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012 = Strategic buyers = Financial buyers Source: mergermarket 2
Nordic M&A market statistics deal size M&A size breakdown, Nordic targets (value, EURm) Nordics 65% 35% 49% 62% 81% 80% 79% 91% 43% 36% 24% 31% 11% 15% 4% 16% 4% 16% 5% 22% 7% 2% 8% 15% 2010 2011 2012 2010 2011 2012 EV (EURm) 0-50 50-250 >250 EV (EURm) 0-50 50-250 >250 No significant change in deal size from 2012 to on an aggregated Nordic level Higher number of small cap deals in the Danish market significant growth in deals below EUR 50m from 2012 to M&A size breakdown, Nordic targets (number of transactions, EURm) Nordics 10% 16% 16% 17% 23% 28% 26% 24% 6% 25% 22% 25% 12% 12% 33% 26% 66% 56% 58% 59% 69% 53% 55% 62% 2010 2011 2012 EV (EURm) 0-50 50-250 >250 2010 2011 2012 EV (EURm) 0-50 50-250 >250 Source: mergermarket 3
Significant change in private equity involvement in and Sweden Danish, Swedish, Norwegian and Finish PE-backed transactions (2006-) 31 49 24 23-43.1% Avg. Avg. Avg. Avg. +41.9% 61 56 57 58 49 52 44 46 18.2% +11.1% 35 28 31 33 25 27 28 31 30 33 30 20 22 24 26 26 22 20 23 18 20 12 12 10 '06 '07 '08 '09 '10 '11 '12 '13 '06 '07 '08 '09 '10 '11 '12 '13 '06 '07 '08 '09 '10 '11 '12 '13 '06 '07 '08 '09 '10 '11 '12 '13 Sources of proceeds as a multiple of EBITDA (European PE transactions 2002-) Private equity successful in almost 25% of deals in 42% increase compared to 2012 Radical drop in PE involvement in Sweden - even higher than overall drop in the M&A market Leverage of 4.7x EBITDA at highest level since 2008 10x 8x 6x 7.0x 6.8x 2.7 2.5 7.6x 2.8 8.3x 2.9 8.8x 3.1 9.7x 9.7x 8.9x 9.2x 9.3x 8.8x 8.7x 3.3 4.4 4.8 4.8 4.2 5.0 3.8 4x 2x 4.3 4.2 4.6 5.3 5.6 6.3 5.2 4.1 4.4 4.5 4.3 4.7 0x 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Debt/EBITDA Equity/EBITDA Other/EBITDA Source: mergermarket & S&P leveraged data 4
Which way is the Nordic M&A market heading in 2014? Positive underlying trends supporting future M&A activity 1 Drivers Valuation 2 Bank financing 3 Private equity dry powder 4 General economic development 5
The Nordic stock market indices trade above 10-year average Median EV Multiple 16x 14x 12x 10x 8x 6x 4x 2x OMX Nordic 40 OMX Copenhagen 20 0x Feb-04 Feb-06 Feb-08 Feb-10 Feb-12 Feb-14 EV/EBIT (FY1E) EV/EBITDA (FY1E) EV/Sales (FY1E) 13.8x 11.9x 10.1x 9.0x 2.2x 1.9x 10yr avge. Median EV Multiple 25x 20x 15x 10x 5x 0x Feb-04 Feb-06 Feb-08 Feb-10 Feb-12 Feb-14 EV/EBIT (FY1E) EV/EBITDA (FY1E) EV/Sales (FY1E) 17.1x 14.7x 14.6x 10.8x 3.4x 2.2x 10yr avge. OMX Nordic 40 EV/EBITDA is trading 13% above 10-year average OMX C20 EV/EBITDA is trading 37% above 10-year average OMX Stockholm 30 OMX Helsinki 25 Median EV Multiple 16x 14x 12x 10x 8x 6x 4x 2x 1.7x 1.4x 0x Feb-04 Feb-06 Feb-08 Feb-10 Feb-12 Feb-14 EV/EBIT (FY1E) 13.0x 11.2x 9.5x 8.5x Median EV Multiple 16x 14x 12x 10x 8x 6x 4x 2x 0x Feb-04 Feb-06 Feb-08 Feb-10 Feb-12 Feb-14 EV/EBITDA (FY1E) EV/Sales (FY1E) 10yr avge. EV/EBIT (FY1E) EV/EBITDA (FY1E) EV/Sales (FY1E) 10yr avge. 12.7x 11.4x 9.1x 8.1x 1.0x 0.9x Source: Factset March 2014, monthly data, banks and insurers are excluded 6
1 Which way is the Nordic M&A market heading? The stock market is now trading at a premium to the M&A market 9.8x EV/EBITDA multiples for traded Nordic companies and deals (2005-) 14.0x 11.6x 11.4x 10.8x 10.6x 10.3x 10.3x 10.3x 9.7x 9.8x 9.8x 10.9x average EV/EBITDA multiple for traded companies exceeds average deal multiple by 2.1x Expected surge in IPO activity in 2014 driven by attractive valuation levels 9.2x 9.2x 8.8x 8.2x 8.3x 2005 2006 2007 2008 2009 2010 2011 2012 EV/EBITDA - Nordic deals EV/EBITDA - traded Nordic companies Source: mergermarket and Factset 7
2 Which way is the Nordic M&A market heading? Senior loan volume has increased significantly from 2012 to EURbn 100 90 European LBO: Annual Senior Loan LBO Volume 1 25 2009-15-year average LBO loan volume of EUR 29bn Loan volume almost doubled from 2012 to 80 22 70 60 20 18 50 15 14 12 40 Average EUR 29bn 10 30 20 5 4 10 0 1998 2000 2002 2004 2006 2008 2010 2012 0 2009 2010 2011 2012 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Note: (1) Reflects loan volume of any transaction where the issuer is owned by a PE firm (includes buyouts, recaps, refinancing, etc.) Source: S&P leveraged data, European LBO quarterly review, Q4 2012 and 8
2 Which way is the Nordic M&A market heading? Increasing number of LBOs with gearing levels at 5x EBITDA or more 100% 80% 60% 40% 20% 0% Distribution of European LBOs by pro forma debt/ebitda levels 2% 0% 4% 4% 8% 6% 5% 10% 10% 14% 14% 10% 13% 14% 23% 16% 18% 32% 30% 37% 36% 19% 20% 24% 38% 51% 24% 30% 36% 39% 38% 29% 32% 7% 44% 27% 37% 41% 35% 31% 29% 35% 19% 31% 36% 36% 23% 27% 41% 30% 36% 26% 18% 21% 24% 23% 13% 30% 23% 18% 15% 28% 16% 11% 13% 15% 21% 14% 10% 8% 11% 8% 11% 8% 3% 5% 4% 3% 3% 3% 5% 7% 10% 10% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 37% of LBOs in was completed with a gearing level of 5.0x EBITDA or more compared to 30% in 2012 Less than 3.0x 3.0x to 3.9x 4.0x to 4.9x 5.0x to 5.9x 6.0x or Higher Source: S&P Leveraged Data, European LBO Quarterly Review, Q4 9
Aggregate commitments (USDbn) 3 Which way is the Nordic M&A market heading? Significant PE dry powder in Europe 250 200 150 100 50 0 Average EUR 155bn 69 69 107 147 PE dry powder in Europe (USDbn) 200 206 204 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 185 184 177 157 Available dry powder amongst European PE funds grew by 13% during Aggregate commitments in European PE fundraising grew by 70% during and funds raised by 13% Source: Prequin, 2014 Buy-out Distressed PE Growth Venture Others European focused fundraising 300 384 400 250 200 150 100 50 0 249 201 201 150 172 100 104 65 44 48 61 2008 2009 2010 2011 2012 300 200 100 0 Number of funds raised Source: Prequin, 2014 Aggregate commitments Number of funds raised 10
4 Which way is the Nordic M&A market heading? Moderate positive economic outlook for 2014 in all Nordic countries -0.8% GDP growth 1.4% 1.1% 0.4% 0.3% 1.6% 1.9% 5.0% GDP growth Sweden 6.3% 3.0% 2.3% 3.0% Positive economic outlook (although moderate) expected to further stimulate the Nordic M&A market -5.7% -0.5% 1.3% 0.7% 2008 2009 2010 2011 2012 2014 2015 2008 2009 2010 2011 2012 2014 2015 GDP growth Norway GDP growth Finland 3.2% 2.8% 3.1% 8.5% 1.2% 1.2% 0.1% -1.6% 0.5% 0.3% 3.4% 2.7% -0.8% -1.0% 1.3% 1.9% 2008 2009 2010 2011 2012 2014 2015 2008 2009 2010 2011 2012 2014 2015 Source: OECD 11
Conclusions 1 Conclusions Large variation in M&A activity in the Nordic countries during 2 Positive development in driven by deals below EUR 50m and increased private equity participation 3 Very high stock market valuations premium to private M&A but also opportunity for multiple pick-up 4 5 Loan market volumes continuing to expand approaching 15-year average and leverage levels continuing to improve PE dry powder at a very high level and sharp increase in fundraising 70% growth in aggregate commitments 6 Positive economic outlook (although moderate) 12
Thank you! Johannes Vasehus Managing Partner Corporate Finance