No. of transactions Corporate Transaction Trends Transaction Advisory Services Transactions by Sweden s largest companies Deal activity amongst Swedish large corporates lower than global M&A market a quarterly publication that aims to identify trends in the level and direction of transactions completed by Sweden s largest companies reports stable transaction activity in Q3 2015. Large Swedish companies completed 36 transactions in Q3 2015, a 13% increase compared to the 32 transactions closed in Q2 2015, and at par with the 36 transactions completed during the third quarter of 2015. The increase in activity compared to Q2 2015 was attributable to a significant increase in the number of divestments (13 in Q3 2015; up from 7 in the previous quarter), which more than offset the slightly lower number of acquisitions (23 compared to 25). The lack of stronger deal activity in Q2 and Q3 2015 is somewhat surprising considering the positive momentum going in to 2015. There are a number of factors that could explain the lower than anticipated deal activity, e.g. equity markets volatility and concerns about China. However, as discussed in this quarter s Hot topic, these issues have not halted M&A activity globally. The current number of completed transactions on an LTM basis (157) is well below the 180 transactions that we, at the outset of 2015, speculated could be reached in 2015. In order to reach that rather bullish projection, the number of transactions in Q4 2015 would need to reach 73, which appears challenging to say the least. Based on this, we find it more likely that the full year will instead land at around 150-155 transactions. This would still be a solid number in the post-financial crisis era. Last year s 165 completed transactions was the highest number reached since 2008. Rolling last twelve months (LTM) transactions 200 180 160 157 140 120 100 105 80 60 40 52 20 - Q3 '08 Q3 '09 Q3 '10 Q3 '11 Q3 '12 Q3 '13 Q3 '14 Q3 '15 LTM no. of transactions LTM no. of aquisitions LTM no. of divestments
No. of divestments No. of acquisitions Quarterly data Year on year quarterly acquisitions 40 35 30 25 25 23 20 15 10 5 - Q1 Q2 Q3 Q4 FY12 FY13 FY14 FY15 Year on year quarterly divestments 20 18 16 14 12 13 10 8 6 7 4 2 - Q1 Q2 Q3 Q4 FY12 FY13 FY14 FY15 The completion of Ratos s divestment of its 58% share in Cinema Group to PE-house Bridgepoint represents the quarter s largest transaction in terms of Enterprise Value, closely followed by Sweco s strategic acquisition of Dutch industry peer Grontmij (effectively creating one of the largest engineering consultancies in Europe). Other significant transactions in Q3 2015 include MTG s strategic acquisitions of the world s largest esports company (Turtle Entertainment) and Europe s largest multi-channel network (Zoomin Tv). The number of transactions involving targets in Western Europe rose sharply in Q3 2015 after limited activity in the previous quarter. In Q3 2015, 3 of all acquisitions completed by large Swedish companies involved targets based in Western Europe. However, on an LTM basis, activity is still centered around the region, with 41% and 62% of acquisitions and divestments, respectively. The most active industry was Manufacturing and construction, comprising 50% of total transactions completed in Q3 2015. Q3 2015 largest transactions (ranked by Enterprise Value) Date Target Seller Buyer Enterprise Target Value ( 100% ) Turnover Acquisitions M M 2015/09 Grontmij Sweco 389 551 2015/09 Turtle Entertainment (7) Omnes Capital MTG 105 50 2015/09 Zoomin Tv MTG 88 n.a. 2015/07 Cinema Group (58%) Ratos Bridgepoint 511 284 2015/08 Canfield Technologies SKF Gen Cap America 21 14 2015/09 Konig Thule Schneektten Beteiligungs 20 15 2
Size and sector LTM and 2014 - by size Acquisitions Target Turnover Q4'14 Q1'15 Q2'15 Q3'15 LTM 2014 under M 20 15 10 18 9 52 67 M 20-100 12 10 6 13 41 37 over M 100 4 6 1 1 12 21 Total 31 26 25 23 105 125 Target Turnover Q4'14 Q1'15 Q2'15 Q3'15 LTM 2014 under M 20 5 - - 6 11 10 M 20-100 6 10 5 4 25 12 over M 100 8 3 2 3 16 18 Total 19 13 7 13 52 40 Q3 2015 and LTM by industry sector and size Target Turnover Q3'15 LTM Industry sector Band Acquisitions Acquisitions Basic industries under M 20 - - - - M 20-100 - 2 4 8 over M 100 - - 2 5 Manufacturing and construction under M 20 7 3 30 4 M 20-100 5 1 19 3 over M 100 1 1 2 3 Retail and consumer goods under M 20-1 5 2 M 20-100 2-5 4 over M 100 - - 2 3 Finance and real estate under M 20 1 1 6 4 M 20-100 1-6 6 over M 100-1 1 4 Healthcare under M 20-1 2 1 M 20-100 - - - - over M 100 - - 3 - TMT under M 20 - - 6 - M 20-100 4-5 3 over M 100-1 2 1 Services under M 20 1-3 - M 20-100 1 1 2 1 over M 100 - - - - Total under M 20 9 6 52 11 M 20-100 13 4 41 25 over M 100 1 3 12 16 Total 23 13 105 52 3
Geographic region Q3 2015 by geographic region Acquisitions Asia (excl Japan) 8% 30% 23% 38% 3 8% 23% LTM by geographic region Acquisitions 6% Asia (excl Japan) 8% RoW 41% 2% 13% RoW 3% 15% 62% 2 4
Hot Topic Hot Topic Capital confidence barometer Pär-Ola Hansson Deputy leader EMEIA Transaction Advisory Services Tel +46-8-5205 9677 Mobile +46-70-318 9677 Email par-ola.hansson@se.ey.com The 13 th edition of EY s Global Capital Confidence Barometer, a bi-annual survey of more than 1,600 senior executives of large companies, in 53 countries and across industry sectors, finds deal appetite at a six-year high. 5 of global companies expect to actively pursue an acquisition in the next 12 months. This is well above the Barometer s long-term average, and significantly higher than the 40% reported last year. 55% of companies have three or more deals in their pipeline, and the majority of companies expect no change in deal pipelines, likely reflecting already high activity. With global deal value up 35% on 2014, and more blockbuster deals already announced in 2015 compared to last year, the prospect for further growth in the M&A market looks almost certain as 83% of executives expect activity to increase further. Despite macroeconomic challenges, with 2015 being marked by large swings in the equity markets, volatility in commodities and currencies and decelerating growth in several key emerging economies (especially China), executives remain confident about dealmaking in the current environment. Four out of five executives are optimistic about the global economy as long-term prospects for growth, albeit modest, outweigh short-term concerns about market volatility. The current trends may raise concerns of an overheating M&A market. However, companies are applying rigor as they look to M&A for growth, with more thorough due diligence and a readiness to abort transactions. 73% of executives have walked away from deals in the past 12 months because they were not fully aligned with their strategic goals. 48% of companies intend to pursue acquisitions outside their own sector. Changing customer behaviour and evolving technology continues to drive a convergence of industries, which looks set to accelerate deal-making as M&A is often the easiest path to adapt to technological, regulatory and behavioural changes and to protect market share. Acquisitions into manufacturing segments were the most cited, followed by retail and wholesale. Cross-border deals look set to continue to dominate the deals market, with 70% of respondents looking at non-domestic deals. A majority of acquisition capital will be invested in developed markets, and 26% of companies have increased their intention to acquire in the Eurozone, signalling increased confidence in the stability of the region. 5
Transaction Advisory Services Contacts Jesper Almström Head of Transaction Advisory Services Brian Gonourie 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 jesper.almstrom@se.ey.com +46-8-5205 9399 brian.gonourie@se.ey.com +46-8-5205 9873 staffan.ekstrom@se.ey.com +46-8-5205 9390 staffan.folin@se.ey.com +46-8-5205 9359 bjorn.gustafsson@se.ey.com +46-8-5205 9497 henrik.u.eriksson@se.ey.com +46-8-5205 8715 kristin.ringland@se.ey.com +46-70-598 5951 kristoffer.stahlbrost@se.ey.com +46-8-5205 9684 carsten.kuhlmann@se.ey.com +46-8-5205 8303 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 www.ey.com/se. 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 e-mail to transactions@se.ey.com. 2015 Ernst & Young AB. All Rights Reserved.