September 2008

Nordic Mid-market

A mergermarket study of industry sector views and expectations

In association with Contents

Foreword 1

Methodology 1

Respondent information 2

Survey findings 3

New non-solicitation legislation in Denmark: how this affects your business or your acquisition 16

M&A in the land of “LAGOM” 21

Historical analysis 25 Nordic mid-market holds firm despite credit instability

A clear majority of executives in mid-sized firms expect to take part in M&A activity over the coming twelve months.

Since the previous Nordic Mid-market report was published Private equity in Norway is maturing rapidly. During 2007, in June 2006, activity in the Nordic private equity market has investments really took off. The outlook for transactions in continued to be good in relative to the European market. the next twelve months is rather positive, as a substantial This year’s report indicates more measured optimism, as number of respondents expect M&A activity to increase. the expectations regarding market activity are lower. The Danish private equity market has developed quickly An important aim of the report is to assess expectations in the last few years. In terms of investments 2005 was both for the general economic climate and M&A market a marquee year, with exceptional growth. During 2006 activity in the region. The results are encouraging when activity slowed. Compared to Sweden and Norway, it comes to the growth prospects for companies. Nordic expectations are more subdued. Finnish private equity Capital envisages slightly slower growth in market activity had a strong year in 2007 with strong increases in for the next twelve months, although from a high level, and both investments and funds under management. the findings of the report seem to support this view. Global The latest edition of the Nordic Mid-market report presents credit market problems have certainly had an effect, and a fairly positive outlook for the Nordic private equity it seems likely that the Nordic region will also be affected industry, despite a period of instability in global credit by credit market difficulties. But so far, the economies of conditions. More than half of respondents believe that the Nordic countries remain relatively sound and the major private equity will be the leading source of financing for regional banks are supportive of private equity activity. M&A also in the coming 12 months. As many as 70% In 2007, Swedish private equity experienced a year of high but of companies believe they are likely to participate in uneven activity. In comparison with 2006, both the number mid-market M&A activity during the next 12 months. and value of investments increased, according to the Swedish Venture Capital and Private Equity Association. The total investments of private equity firms amounted to SEK 48bn.

Methodology

Cederquist, Nordic Capital and Ronne & Lundgren commissioned mergermarket to conduct a study of Nordic corporate organisations regarding their attitudes to M&A activity in the region. mergermarket interviewed 100 senior executives of medium-sized enterprises in Denmark, Finland, Norway and Sweden. Interviews were conducted over the telephone and all respondents were guaranteed anonymity.

Nordic mid-market report 1 Respondent information

Has your company been involved in an acquisition What is the annual turnover of your business? or divesiture over the last five years?

Yes €25 - €50m 92% 20% 8% No €51 - €100m €101 - €150m €151 - €200m €201 - €250m 23% 23%

17%

17%

Which of the following best reflects the status of In which industry sector does your company your company? operate?

Listed company 2% 55% Industrials 9% 26% Owner managed business 5% Technology, Media & Family owned company Telecommunications (TMT) Energy, Mining & Utilities Private equity backed company 8% Transport & Infrastructure Financial Services Consumer 14% 8% Business Services Medial, Pharmaceuticals & Biotech Leisure 18% 8%

22% 11% 14%

2 Nordic mid-market report Survey findings

Do you expect your business to expand at a faster What do you expect to happen to the total number rate than the national economy in the next 12 of mid-market M&A transactions in the Nordic months? region in the next 12 months?

2% Yes, I expect my business to vastly 3% Significantly increase 12% outperform national economic growth 28% 8% Slightly increase Yes, I expect my business to outperform national economic growth Remain the same 44% I expect my business to grow in line Slightly decrease with the economy Significantly decrease No, I expect my business to under- 17% perform compared to the economy No, I expect my business to significantly underperform compared to the economy 50%

36%

• Respondents were generally optimistic regarding their • Given the global effects of the credit crunch, it is of little company’s growth prospects over the next 12 months. surprise that respondents are more cautious in their Indeed, over half of respondents expect their business mid-market M&A expectations over the next 12 months. to outperform national growth with a further 36% 17% of respondents expect Nordic mid-market M&A to anticipating their business performance to grow in line remain at current levels while around three quarters of with the national average. Interestingly, only 8% expect respondents believe activity will either slightly increase their business to underperform the national economy in (50%) or significantly increase (28%). the coming 12 months although several respondents were • Conversely,19% expect the number of mid-market M&A unsure of their growth prospects. deals in the region to decrease with one such respondent remarking: “The current economic state and insecurity in the market will only serve to decrease the level of M&A transactions.”

Nordic mid-market report 3 Survey findings

What do you expect to happen to the total number Which deal size ranges do you believe will witness of mid-market M&A transactions in your country in the most M&A activity in the Nordic mid-market the next 12 months? over the next 12 months?

100 <€15m 10% 10% 19% €15m - €100m 24% €100m - €250m 80 40% 18% €250m

53% 60 60% 65% 44% 10%

40 40% Percentage of respondents

20 24% 25% 25% 20% 8% 5% 0 Sweden Norway Finland Denmark

Significantly decrease Slightly increase Slightly decrease Significantly increase Remain the same

• In terms of anticipated mid-market deal making in • A resounding 72% of respondents believe deals valued each of the Nordic countries, Norwegian and Swedish under €100m will dominate deal flow in the Nordic mid- respondents appear to be most bullish on M&A prospects. market in the next 12 months. More than one respondent 30% of respondents in Norway expect M&A in their qualified this view by alluding to the fact that many territory to increase with a further 60% predicting activity smaller businesses in the region are seeing their founder levels will remain the same in the next 12 months. approaching retirement age, with one respondent noting: Similarly, 32% of Swedish respondents expect mid- “There are a great number of family-owned businesses market M&A in the country to increase although a sizeable that are in generation change.” Elsewhere, a noteworthy minority (24%) are more pessimistic and are anticipating a 18% of respondents believe deals valued above €250m slight fall in the number of transactions. will witness the most M&A deal flow in the Nordic mid-market over the next 12 months. • A quarter of Finnish respondents (25%) expect mid-market M&A in their territory to slightly increase in the next 12 months with only 10% foreseeing a decrease. Danish respondents appear to be more negative in their outlook with 40% expecting Danish mid-market M&A activity to fall over the time period in question.

4 Nordic mid-market report Which sectors do you believe will witness the What sources of financing do you think Nordic mid- majority of M&A activity in the Nordic mid-market market M&A activity will utilise the most in the next over the next 12 months? 12 months?

1% 3% 2% 3% 3% 2% 4% 100 7% 7% 14% 8% Private 51% 16% 15% equity 19% 24% 22% 80 34% 37% Bank 39% debt 50% 57% 60 54% 57% 47% 39% Internal 34% funding 56% 45% 40 42% Public 26%

Percentage of respondents 24% markets 22% 26% 20 29% 23% 21% 14% 13% Private 8% 13% individuals 12% 9% 7% 4% 4% 4% 4% 3% 0 TMT Industrials Financial Business Pharma, Consumer Leisure Transport Energy, 0% 10% 20% 30% 40% 50% 60% Services Services Medical & Mining & Infrastructure & Biotech Utilities Percentage of respondents Not active at all Very active Inactive Most active Some activity

• The TMT sector was highlighted as the hottest niche • Intriguingly, 51% of respondents believe that private with 55% of respondents expecting it to be most active equity will be the most heavily utilised source of financing or very active in terms of M&A activity in the next 12 by Nordic mid-market firms in M&A transactions in the months. A significant proportion of respondents believe next 12 months. 39% of respondents cite the more that a number of other industry sectors will also witness conventional method of bank debt with 34% naming a notable level of deal making. Around one third of internal funding. Despite the turmoil in financial markets, a respondents predict that Industrials (36%), Business not insignificant 26% of respondents believe mid-market Services (33%), Energy, Mining & Utilities (32%) and financing for deals in the Nordic region over the next Financial Services (31%) will either be most active or very 12 months will principally be sourced in public markets. active in terms of M&A activity over the next 12 months. Private individuals (8%) appear to be a comparatively unlikely financing source in the eyes of respondents.

Nordic mid-market report 5 Survey findings

What was the main strategic reason for your most What is the likelihood of your company undertaking recent transaction? mid-market M&A activity in the next 12 months?

3% Extremely likely Access new 7% 51% markets Very likely 25% Likely Gain market 43% share Not likely

Achieve Not likely at all operational 33% synergies Achieve competitive 32% size 26%

Reduce cost 18%

Acquire new 39% technologies and/or 17% know how

Defence 3%

0% 10% 20% 30% 40% 50% 60%

Percentage of respondents

• Over half of respondents (51%) cited accessing new • Around one third of respondents claim that their company markets as the driving factor behind their company’s most is either very likely (25%) or extremely likely (7%) to be recent M&A transaction. Meanwhile, the not dissimilar involved in an M&A transaction in the next 12 months. issue of gaining market share was named by 43%. • In terms of future Nordic mid-market M&A activity, it Around one third of respondents claimed that achieving is perhaps rather telling that only 29% of respondents operational synergies (33%) and competitive size (32%) believe that they are less than likely to undertake M&A in were the main reasons for their company undertaking their the next 12 months. most recent M&A deal.

• Issues surrounding cost reductions (18%) and acquisition of new technologies (17%) emerged as secondary considerations behind respondents’ most recent transactions and were selected by a notable minority of respondents.

6 Nordic mid-market report What factors do you take into consideration when What do you consider to be the most serious planning an M&A transaction? obstacles to Nordic mid-market M&A activity?

Financing Strategic 67% 48% lifestyles

Lack of targets/ lack of information 18% Increase market on targets share/access 38% new markets

Macroeconomic 16% factors Financing options/price 13% Price 16%

Quality of advisers 3% Management culture 6%

0% 10% 20% 30% 40% 50% 60% 70% 0% 10%20% 30%40% 50%

Percentage of respondents Percentage of respondents

• Over two thirds of respondents (67%) claim that they • Financing the deal (48%) was considered by respondents principally look at the potential synergies and strategic fit to be the most serious obstacle to conducting Nordic of a target company when planning an M&A transaction. mid-market M&A. A number of such respondents claimed This perspective was reinforced by the following comment that difficulty accessing capital is a major impediment to from a Swedish respondent: “Finding the right target that M&A activity in the region. Moreover, a further 16% of fits in with our business line is simply more important than respondents consider the not dissimilar issue of price to anything else.” be the most serious obstacle.

• 38% of respondents also cited the more generic issues • A lack of targets and a lack of information on target of increasing market share and accessing new markets as companies were named by 18% of respondents with the main consideration behind an M&A deal. The price and a Finnish respondent remarking: “The market in which financing options of the deal was named by 13% while we operate is saturated and as a result we need to look the quality of the advisers on a transaction was mentioned away from the region to the emerging markets in the by only 3%. east.” 16% of respondents cited macroeconomic factors such as economic growth, tax levels and the global credit crunch. Conversely, 6% of respondents believe that the more micro issue of the management culture in the Nordic region acts as the largest obstacle to mid-market M&A.

Nordic mid-market report 7 Survey findings

Do you think the ongoing credit crunch has had an What do you expect to happen to the total number affect on levels of Nordic mid-market activity? of mid-market private equity M&A transactions in the Nordic region in the next 12 months?

2% 3% Significant positive effect Significantly increase 6% 8% Insignificant positive effect 33% Slightly increase 14% No effect Remain the same

26% Insignificant negative effect Slightly decrease Significant negative effect Significantly decrease

27%

35% 46%

• 46% of respondents believe that the ongoing credit • A combined 36% of respondents expect private equity crunch has had an insignificant negative effect on deal making to increase in the Nordic mid-market over Nordic mid-market M&A activity. An additional 14% the next 12 months while 35% believe activity will stay at of respondents were more downbeat and noted that current levels. Given the effect that the credit crunch has the credit crunch has had a significant negative effect. had on financial buyers, it would be reasonable to suggest Several such respondents highlighted difficulties relating that such sentiments point towards respondents being to financing M&A deals with one Norwegian respondent cautiously optimistic regarding private equity activity. commenting: “Because of the credit crunch it is harder to • Alternatively, 29% of respondents predict private equity finance deals; the risk is higher and the willingness to take activity in the Nordic mid-market will decrease in the risks is smaller than it was 12 months ago.” next 12 months with a Finnish respondent justifying • In comparison, it is somewhat unsurprising that only this viewpoint by noting: “In current market conditions 14% of respondents believe that the credit crunch has companies with high returns are likely to be scarce, positively impacted upon mid-market M&A activity in therefore, I expect private equity activity to be subdued.” the Nordic region. The remaining 26% believe that the credit crunch has had no effect although more than one respondent alluded to the likelihood of some effects being felt in the future.

8 Nordic mid-market report Have you ever thought about partnering with a How do you think this compares to three years ago? private equity firm to undertake mid-market M&A activity?

<1% <1%

No Significantly more likely today 72% 25% Yes 7% More likely today The same Less likely today Significantly less likely today

28% 67%

• A resounding 72% of respondents claim that they have • Over two thirds of respondents reported that there has never thought about partnering with a private equity firm to been no change over the last three years with regard undertake mid-market M&A. Such respondents highlighted to their willingness to partner with a private equity firm several reasons which have governed this stance, namely on a mid-market M&A deal in the Nordic region. 25% of the desire to keep full control of the business and there respondents consider themselves more likely although 7% being no need to seek external financing. believe they are less likely to partner with a financial buyer than three years ago.

Nordic mid-market report 9 Survey findings

Where do you expect most private equity To what extent do you think private equity firms opportunities in the Nordic mid-market to originate will be affected by the following when looking to from in the next 12 months? undertake Nordic mid-market M&A activity?

2% 4% 2% 2% 100

Family 38% 17% 19% businesses 21% 21% 80

Private mid-market 33% companies 60 49% 41% 51% 63% Divestment from market-listed 26% 40 companies Perecentage of respondents

20 29% 32% Existing private 26% equity portfolio 26% 3% 2% 2% 14%

0 0% 5% 10% 15% 20% 25% 30% 35% 40% Forecasted falling Rising Increasingly Increased economic growth commodity competitive sovereign and rising inflation prices cash-rich wealth fund Percentage of respondents across the region corporate buyers activity

Not affected at all Very affected Slightly affected Heavily affected Affected

• A notable proportion of respondents believe that private • Around a third of respondents (34%) believe that private equity opportunities in the Nordic mid-market will originate equity firms will be at least very affected by rising from several sources in the next 12 months. Family commodity prices when looking to undertake M&A in businesses emerged as the most likely source for private the Nordic mid-market. 32% cited the predicted future equity and were cited by 38% of respondents while a third economic downturn and increasing inflation in the region of respondents named private mid-market companies. as likely to have a significant effect while 28% alluded Alternatively, a significant 26% named both secondary to competition from corporate buyers. Only 14% of buyouts and divestments from listed companies as the respondents believe private equity will be very affected most likely hunting grounds for private equity buyers in the by sovereign wealth funds although an additional 63% did Nordic mid-market. believe that they will be affected in some way by cash rich buyers emerging principally from the Middle East.

10 Nordic mid-market report What do you expect to happen to the level of cross- Which buyers do you expect to very actively pursue border M&A activity in the Nordic mid-market in the cross-border M&A opportunities in the Nordic mid- next 12 months? market over the next 12 months?

1% 2% Significantly increase 46% 65% Slightly increase Nordic 9% Remain the same 27% Slightly decrease Asia Significantly decrease 20% Middle East

18% Germany

17% Americas

15% 42% UK

0% 10% 20% 30% 40% 50% 60% 70% 80%

Percentage of respondents

• Respondents were somewhat optimistic regarding the • The overwhelming majority of respondents (65%) level of cross-border mid-market M&A in the Nordic expect cross-border mid-market buyers to originate from region over the next 12 months. A combined 48% of other territories within the Nordic region itself. 27% of respondents believe activity will increase with one respondents believe Asian buyers will be very active particularly bullish Swedish respondent commenting: acquirers of Nordic mid-market assets over the next 12 “Nothing will stop us, if the opportunities are there we will months while 20% name the Middle East, perhaps with take them.” the ever increasing presence of sovereign wealth funds in mind. Interestingly, companies from the Americas and • Elsewhere, 42% of respondents expect cross-border mid- the UK are predicted to be relatively inactive acquirers market deal flow in the region to remain at current levels over the time period in question despite being traditionally while 10% believe the next 12 months will see a decline enthusiastic investors in the region. in the level of such deal making.

Nordic mid-market report 11 Survey findings

Where do you expect Nordic buyers to very actively What do you now consider to be the most serious pursue cross-border M&A opportunities abroad in obstacles facing cross-border Nordic mid-market the next 12 months? M&A activity?

Financing 49% Europe 38%

Cultural issues 18%

34% Asia Regulatory/ legal issues 17%

Lack of information on 12% 20% target/finding Americas right target Macroeconomic issues 11%

Middle East 10% Price 5%

0% 5% 10% 15% 20% 25% 30% 35% 40% 0% 10% 20% 30% 40% 50%

Percentage of respondents Percentage of respondents

• Respondents expect Nordic buyers to very actively pursue • 49% of respondents believe that the financing of cross-border M&A opportunities principally in Europe transactions is the most serious obstacle facing cross- (38%) and Asia (34%) over the next 12 months. North border Nordic mid-market M&A activity. Several such and South America was selected by 20% with more than respondents alluded to the high cost of leverage and one respondent suggesting that the current economic general difficulty in gaining access to capital in the current downturn in the United States will act as a deterrent to market conditions. incoming foreign investment in the country. • Given the nature of cross-border deals, it is rather unsurprising that 18% of respondents identified cultural issues as being a notable obstacle: “Understanding different business cultures is always a great challenge and if you don’t you will never be successful.” 17% of respondents named complicated regulatory and legal issues associated with acquiring a target company in a foreign territory as the most serious obstacle.

• Interestingly, the issue of price is not considered to be a serious obstacle to cross-border M&A with only 5% of respondents identifying it as an obstacle. This is in slight contrast to the 16% of respondents who named price to be the most serious obstacle to overall M&A activity in the Nordic mid-market. This relative imbalance of opinion suggests that other intricacies involved in a cross-border transaction take precedence and respondents may be more flexible over the issue of price if it is necessary to get the deal done.

12 Nordic mid-market report In terms of your experience of working with M&A In terms of your experience of working with M&A advisers, would you rate the quality of advice advisers, would you rate the advice previously previously received of a high quality? received as good value for money?

44% Legal 41% Financing advisers

Cultural 44% Financial 38% issues advisers

Regulatory/ Coporate legal issues 41% finance 37% advisers Lack of information on 40% Tax 36% target/finding advisers right target Macroeconomic 39% Own 32% issues accountant

Price 27% Banks 27%

0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50%

Percentage of respondents Percentage of respondents

• Respondents have recognised legal advisers and tax • Legal advisers also won the race of “good value for advisers as providing the highest quality of work. money” followed by financial advisers. A significant Meanwhile, over a third of respondents also commented minority of respondents also believed that their corporate that their corporate finance advisers (41%), financial finance advisers (37%), tax advisers (36%) and own advisers (40%) and own accountant (39%) provided high accountant (32%) represented good value for money. quality advice on M&A deals. Interestingly, only 27% regard the quality of advice received from banks as high quality.

Nordic mid-market report 13 Survey findings

If you have employed M&A advisers in the past, Where do you feel there is most room for which areas do you feel are most important? improvement?

• 33% of respondents are content with the service Financing 49% provided by their M&A advisers. Out of the remaining respondents who feel there are certain areas that can be Cultural 18% issues improved, 26% would like to see greater expertise from their advisers and a greater ability to handle complex Regulatory/ legal issues 17% transactions with 10% remarking that they would like to Lack of receive greater value for money. information on 12% target/finding right target • Around 10% of respondents specifically feel that both Macro- economic 11% their financial and legal advisers could improve the quality issues of their service across the board while 5% would like to Price 5% see an improvement in the service provided by their tax advisers. 0% 10% 20% 30% 40% 50%

Percentage of respondents

• A resounding 68% of respondents believe that an Who in your organisation decides which advisers understanding of complex deals and past experiences to use? are the most important attributes of an M&A adviser. This point was reinforced to good effect by a Danish respondent who said: “An intimate knowledge of our CEO 80% business is essential, the advisers have to have the ability

to handle complex transactions.” CFO 60%

• A not insignificant 26% named sector and geography Head of corporate 11% expertise while the cost of advisers and value for money development emerged as a secondary consideration in the eyes of Head of legal 11% respondents, selected by 18%. Surprisingly, individual ability and relationships were only deemed the most Existing external 1% important factors surrounding the employment of M&A legal advisers advisers by 12% of respondents. Existing external 1% financial advisers

0% 10% 20% 30% 40% 50% 60% 70% 80%

Percentage of respondents

• The clear majority of respondents remarked that either the company Chief Executive Officer (80%) or Chief Financial Officer (60%) decides which advisers to use on an M&A transaction.

14 Nordic mid-market report “Rønne & Lundgren has followed on from its successes last year and is one of the fastest-rising firms in Denmark according to peers”

– IFLR 1000

Rønne & Lundgren Tel +45 3525 2535 Rønne & Lundgren is one of Denmark’s most succesful and fastest growing law firms. Tuborg Havnevej 18, Fax +45 3525 2536 We assist Danish and foreign companies, private equity houses, financial institutions, DK-2900 Hellerup E-mail [email protected] venture funds and public institutions within all aspects of mergers & acquisition. Copenhagen, Denmark www.ronnelundgren.com For more information please see www.ronnelundgren.com New non-solicitation legislation in Denmark: how this affects your business and your acquisition

As of 1 July 2008, new legislation has taken effect in Denmark which significantly limits the usage of non-solicitation of employees’ clauses. As non-solicitation of employees clauses are often used in mid-market transactions it is important to be aware of the content and limitations of said legislation. Below please find a brief outline of the new legislation.

The consequences for mid-market transactions The Legislation sets forth that a non-solicitation of employees clause must comply with the following three conditions in order Mid-market transactions often involve companies in which to be valid (jointly referred to as the “Conditions”): the owners also constitute the management of the company • the non-solicitation of employees clause as well as its and/or where the value of the company is closely linked to specific consequences to the employees must be known to management and key employees. Consequently, focus on the affected employees; retaining management and employees post-closing are often a key parameter for a potential investor while the seller will seek • the affected employees must consent to the clause in to limit the risk of a potential (industrial) investor soliciting away writing; and management and key employees if a potential transaction is not • the affected employees must receive a compensation of completed. In this respect non-solicitation of employee clauses no less than 50% of their respective salary per month as are often applied. long as the clause restricts the employee’s employment possibilities in the period after the expiration of the employment of the employee. The new Legislation The legal effect of these conditions not being met is that the As of July 1, 2008, new legislation (the “Legislation”) has taken contracting parties are not bound by their agreement containing effect in Denmark which regulates non-solicitation of employees the non-solicitation of employees clause, hence each party will clauses. The purpose of the Legislation is to limit the usage of be free both to hire and solicit the employee in question. non-solicitation of employees clauses and to make it virtually impossible for companies to enter into agreements which The compensation shall be paid as of the time of resignation limit the employees’ employment options (e.g. the right to be with an amount corresponding to 50% of the employee’s salary employed by competitors) without the employee’s knowledge as long as the clause restricts the employee’s employment and without the employee receiving compensation. possibilities in the period after the expiration of the employment of the employee. The following limitations apply: The non-solicitation of employees clauses regulated by the Legislation can be divided into: • compensation shall not be paid by the employer if the employee concurrently is entitled to compensation due to a • clauses in agreements entered into by two or more valid non-competition clause; employers/companies according to which the contracting parties agree not to hire or solicit each other’s employees; • the employer has the right to offset the compensation against income from other appropriate employment which • clauses between an employer and an employee; and the employee is in receipt of during the term of the clause;

• the non-solicitation of employees clauses entered into when • a non-solicitation of employees clause cannot be asserted signing a non-disclosure agreement (“NDA”) entered into in against an employee who has been employed for a period connection with a sales process. not exceeding three months.

16 Nordic mid-market report Modifications in NDAs and SPAs What is the effect of the new Legislation to a From an M&A perspective the Legislation contains an MidMarket transaction? important exception. Non-solicitation of employees clauses When negotiating NDAs it is important to keep in mind, that which are entered into in connection with negotiations a non-solicitation of employees clause therein is only valid for regarding a possible acquisition are exempt from fulfilling 6 months and if an extension is needed, it is a condition that the Conditions. The seller and potential investor are still free there are actual ongoing negotiations taking place between the to enter into a non-disclosure agreement containing a non- contracting parties. It is not clear from the Legislation whether solicitation of employees clause in the NDA which affects the a NDA containing a non-solicitation of employees clause with employees of the target company without disclosing such a duration of longer than 6 months is to be considered invalid agreement to the employees and without obtaining their or whether the duration of such clause is simply interpreted consent or compensating the employees in this respect. as being valid, but with a duration not ex-ceeding 6 months. In our view, the correct interpretation leads to such clause being Discretion is still an option! invalid. However, the Legislation contains a six month time limit for This means that if the parties negotiate for five months then a non-solicitation of employees clause in a NDA. Should the the investor is free to solicit away the seller employee one negotiations with regard to an acquisition continue for a period month after the negotiations have ended. If the seller wishes longer than six months, an extension of the non-solicitation to ensure that he is protected against such risk then the of employees clause beyond the six months may be agreed Conditions set out above must be met. This makes planning provided that the parties maintain actual ongoing negotiations. of the data room and the decision on when and what to If an acquisition is successfully completed, the parties may disclose in respect of employee related information even more agree on a non-solicitation of employees clause for another six important. months following closing. Provided that the non-solicitation of The Danish Marketing Practices Act (hereinafter referred to employees clause is limited to six months such clause is valid as the “Act”) still applies along side the Legislation. Section 1 and enforceable even if the Conditions are not met. If a buyer and section 19 of the Act prohibits acts being contrary to good requests such security for a longer period, the Conditions must marketing practices and prohibits the use of business secrets. be met in order for such clause to be valid. Consequently non- However, case law indicates that it is very difficult to be solicitation of employees clauses can be agreed free of charge successful in cases based only on alleged violations of the said and in full discretion for: provisions in the Act. This gives all the more reason to draft • 6 months in connection with negotiations (typically in a agreements in accordance with the Legislation. NDA) with the possibility of an extension; and

• 6 months after the successful completion of an acquisition Limitations in the SPA (typically in a SPA). In the SPA the buyer and the seller may insert a non-solicitation Non-competition clauses and non-solicitation of customers of employees clause with a duration of up to six months valid clauses as part of an agreement between the seller and the from closing without the knowledge of the employees of the buyer in a NDA and/or a share sale and purchase agreement companies and without compensating them. The buyer and the (“SPA”) are not comprised by the new Legislation and are still seller cannot insert a non-solicitation of employees clause with exercisable and enforceable between these parties for a period a duration exceeding six months without entering into separate of up to three years. agreements with each of the affected employees in which the affected employee consents to the clause and the specific consequences to the affected employee is explained.

Nordic mid-market report 17 Potential limitations going forward Any investor should consider if a non-solicitation of employees clause is needed for a period exceeding six months following closing. In the affirmative, the investor should request the seller to provide as a conditions precedent to closing acceptance from the employees affected by the non-solicitation of employees clause, containing their consent as well as information regarding the specific consequences of the clause and compensation. Further, the future potential expenses related to such clauses should be evaluated and proper measures should be taken in the SPA.

The company and the employee may following completion of a transaction enter into a separate agreement, containing a non-solicitation of employees clause. In order to be valid such clause must meet the Conditions and consequently the company may have to pay compensation as set out above.

Please contact Ronne & Lundgren for more information on how to comply with the new legislation or to request legal assistance in acquiring a Danish Business. Contact information can be found on the page opposite.

18 Nordic mid-market report Law Firm: Banking & Finance: Rønne & Lundgren is one of the leading law firms in Denmark The firm advises on all aspects of banking and finance law and and by peers considered as one of the fastest rising. The renders services with in the areas of assets and acquisition firm is recognised for providing high quality, around the clock, financing, project financing, securitisation, refinancing and solution driven legal advice. Rønne & Lundgren assists a syndication of loans, conclusion of agreements pertaining to broad range of Danish and foreign companies (listed as well financial instruments/derivatives trading, regulation of financial as non-listed), financial institutions, private equity houses, businesses, portfolio management and leasing. organisations and public institutions. Rønne & Lundgren is regular participant in mid-size and larger national and cross- Securities & Capital Market Law: border transactions. Rønne & Lundgren assists on all matters relating to securities Rønne & Lundgren’s corporate finance practice (M&A, and capital market law in connection with admission of shares financing and capital markets) has experienced significant on stock exchanges and other markets, including First North, growth in recent years. equity financing of listed companies, including public tenders, issuance of shares and private placements, takeover of listed Mergers & Acquisition: companies, including mandatory and voluntary tender offers as well as delisting from stock exchanges and other markets, Rønne & Lundgren’s M&A practice assists within all aspects preparation of prospectus and control of listed companies of M&A activities, including legal due diligence, acquisition with regard to disclosure rules, rules regarding internal and sale of business enterprises, structuring, MBO, mergers knowledge and ban on insider trading, share buy-back and and establishment of joint ventures. incentive schemes.

Rønne & Lundgren put together a tailor-made team of The firm maintains close links to well-reputed law firms in experienced attorneys on each transaction in order to meet all relevant jurisdictions. A significant part of the corporate our clients’ request of solution oriented and value adding finance and real estate work involves clients domiciled legal advice. outside Denmark.

CONTACTS NAME PHONE EMAIL DENMARK Tuborg Havnevej 18 Tel +45 3525 2535 Mergers & Acquisition Henrik Juul Hansen +4535252989 [email protected] DK-2900 Hellerup Fax +45 3525 2536 Banking & Finance Thomas Skjellerup +4535252986 [email protected] Copenhagen Web: www.ronnelundgren.com Securities & Capital Market Law Jesper Schultz Larsen +4535252987 [email protected] Real Property Stig German Mathiasen +4535252959 [email protected] Competition Law Christina Heiberg-Grevy +4535252916 [email protected] Corporate & Commercial Kim Håkonsson +4535252902 [email protected] Employment Law Anne Marie Abrahamson +4535252907 [email protected] Tax Bente Møll Pedersen +4535252924 [email protected] IP & Technology Jeppe Brinck-Jensen +4535252999 [email protected] Insolvency & Reorganisation Poul Jagd Mogensen +4535252935 [email protected] Litigation & Arbitration Jesper Lundgren +4535252901 [email protected]

Nordic mid-market report 19

M&A in the land of “LAGOM”

“Lagom?” Anyone considering engaging in M&A activity in Sweden, generally and rightfully known to offer a modern, open minded, transparent, well educated and organized environment for M&A-transactions, including those with an international angle to it, may still benefit from being familiar with the genuinely Swedish concept lagom. This may be of particular importance in transactions with public entities resulting from the strong privatization trend in Sweden.

Unlike the well-known Swedish contribution to the English Cultural clash language “ombudsman”, the expression lagom is often said not to translate into English at all. However, “good enough” One story, too good to be forgotten, which endorses the or “just about right” conveys the meaning loosely. One importance of striking the right chord as a foreign participant could also say that the Anglo Saxon concept of being “just in a Swedish transaction, involved a situation where we and equitable” is a component of its definition. So what is represented a US (Texan) company aiming to acquire a this feature about? A word quiz or something on legal terms Swedish cooperative car rental chain in the early nineties. or other does it have other relevance? Read on to see for The cultural differences between the parties were obvious yourself. and the negotiations soon became stuck. The CEO of our client then suddenly asked for a break, during which he dead seriously suggested that when the negotiations resumed he Semantic or culture? should bring a briefcase of cash to the table. This strategy – as alien to lagom as anything can be – made perfect sense to Even if lagom can be twisted around to “om lag”, which is the client and was underpinned with the following words of Swedish for “about law”, it has nothing to do with law. It wisdom, which since then are inherent to the firm: “Money is more of a cultural thing, but nevertheless of relevance if on the wood, makes talking good!” Ultimately, there was no you want to understand Swedish people’s mindset. It could deal in this case. probably also explain certain phenomena or difficulties you may sometimes come across in a Swedish M&A-transaction.

In a speech on how to manage US relations delivered at the A Swedish norm Swedish Venture Capital Association’s Nordic Private Equity Lagom states a Swedish norm for all sorts of things. When Congress in September 2007 by Eva Solhem of Sol Venture a child is asked about how much food he or she wants to Partners, participants were reminded that the typical US be served in the school canteen, the answer can range from mindset that “average is never enough” is a driving force “little” to “much” or just lagom. How hot should it be in the behind many US corporate success stories. Whilst that should sauna? A Finn would of course say “very hot”, but a typical be true in Sweden as well, being just average is much more Swedish answer could be lagom hot. Very often, lagom is accepted here and sometime a key to success in beating the used to endorse an opinion expressed or a choice made, such average. as “I believe 55 mph is a lagom speed to drive my car in the countryside” or – back to the canteen again – “please give me seven meat balls, that will be lagom.”

Nordic mid-market report 21 M&A in the land of “LAGOM”

Lagom in business Lagom incentive programs

As already indicated, lagom has its given place in Swedish Despite the features and effects described above, it is business life as well, including transactions. In many fair to say that during recent years, the “rule of lagom” situations when a deal is being negotiated, a foreign (or for has loosened its grip a bit when it comes to salaries and that matter Swedish) party, seller or buyer, should try to figure compensations generally. A residual effect is however still out what the opposite Swedish party may find aslagom . In to be found in the design of incentive systems in Swedish these circumstances, the concept is not very different from companies. Programs of this kind tend to be of wider scope, finding out the other party’s pain threshold, but a Swede comprising more categories of employees than they do often adds certain moral aspects. To ask for too much in a outside Sweden. Thereby they tend to be more acceptable negotiation can be just that, too much, and backlash in the in the public opinion, even if the design is such that top conclusion that the party asking for too much is generally dogs receive substantially more than others. The fact that unreasonable. Swedish incentive programs often comprise large number of employees has its given pros and cons. For any one considering an acquisi­tion, a well incentivised work force may Lagom compensation be valuable. The flop side of course is if the parameters fail and the expected upside for the employees turns into a loss. Another effect of the more social and egalistic aspects of Such events are easier assumed by management than the lagom is the way all sorts of economic compensation are more “ordinary” workforce and may disrupt the whole basis being viewed in Sweden. The income spread between various for a company or transaction. categories of the Swedish workforce is very limited. For instance, academic merits seldom pay off. Coupled with an income tax rate of 55%, the system may seem tuned for no Private Equity and Lagom one to ever get wealthy on his or her salary. So, are there any implications of the “rule of lagom” on Sports and entertainment are the great exceptions, where the Swedish private equity arena? Surprisingly few. This is the “rule of lagom” seems not to apply. Whilst it is widely even more surprising in view in the recent debate about accepted that a successful artist or sportsman becomes compensations, transparency and taxation of private equity wealthy, economically independent even, it is often seen funds and managers in the rest of Europe. It is probably fair with suspicion if that is the result of hard work or successful to say that the UK debate has been largely driven by the UK business activities. concept of carried interest taxation, which has no similarity in Sweden. With few exceptions, Swedish private equity players have been left in peace. The ongoing battle of the level of Lagom by definition management and general partner fees has not picked up any Salary is actually one of few areas where you can find a more particular public interest, even if these kind of fees, ultimately quantitative definition oflagom , or at least get a hint of what and arguably could be held to influence the result of public you risk as being regarded as over-compensated. Any salary savings within the social welfare system. above 7.5 basis amounts as defined for purposes of Swedish social welfare legislation, does not render any rights under such legislation. Accordingly, salaries in excess of €32,500 per annum are levied with national insurance compensation (32% of the gross salary payable by the employer) but without any corresponding right for the employee to sick pay, maternity pay or similar benefits, which in Sweden are otherwise proudly known for.

22 Nordic mid-market report In contrast, the situation is quite different for the Swedish Lagom privatisation banking industry, offering more stan­dardised or commoditised savings products directly to consumers. Regarding such Finally, some words about the Swedish privatisation frenzy. products, in particular structured products, there has been Since the election of a centre-right coalition government last and is still wide spread criticism. This is very different from year, the course has been clear. Extensive privatisation of what seems to be the situation for the Swedish private publicly held companies and operations can be expected. Six equity industry, focus has been much more on charges than major holdings have been put up for sale, the most known of on performance. This is a good example of where the “rule which is Vin & Sprit with its vodka brand Absolut. The process of lagom” has translated into very specific perceptions of is under way. Legal advisors, one of which is Cederquist, have what is fair and reasonable and what is not. As a result, fee been assigned for all transactions. However, the Municipality features like “High Watermark principles” have found a fertile of Stockholm was faster off the blocks. Already in June 2007 ground in Sweden, even if reality has recently proved them to it announced the MEURO 1,100 sale of eleven shopping malls be much more complex, if not counter-productive, resulting in Stockholm to UK-based Boultbee, advised by Cederquist. in rapid liquidation of, or dull prospects for, underperforming Without disclosing the strategy of Boultbee in the deal with (hedge) funds. the Municipality of Stockholm, one can expect potential buyers in the privatisation deals to come to engage in investigations into the political environment and the Lagom and the credit crunch mindset of the politicians and civil servants in charge of the transactions. At least officially, the Municipality of Stockholm It can be noted that even in the land of lagom, everything is stated that a buyer of the property in question, apart from not always just about right. Private equity companies here paying a high price, would have to demonstrate its long term too have felt the icy winds lately and still sweeping the credit ambition to continue to develop the properties, of which some and financing markets. Industrial buyers’ competitive strength were in residential and some in socio-economic troublesome have undoubtedly increased. In some recent deals, we have areas, in a responsible way. advised private equity clients on investments and divestments where payment for shares – with a view to a listing or a sale The Boultbee transaction may serve as a good example of to an industrialist of an enlarged portfolio company within a the challenges any contender, whether industrial, financial or rather short time have been just: lagom. private equity, will meet when entering the battle for Swedish privatisation targets. Even if auction processes will clearly That said, the grip of the credit crunch, so far, has been rather continues to dominate in the high end of the value range as a gentle. This may be explained by a lagom attitude amongst means to achieve as high a price as possible, one may at least Swedish lending banks, which have kept them from engaging speculate that factors other than price may be decisive when in the transactions highest leveraged and therefore from need publicly owned assets go private. At least this seems likely at for and dependence of large scale syndication. The general the other end of the scale, for instance in spin offs of small perception within the Swedish private equity community now and local entities such as primary health care centers and is that increased interest rates and stricter covenants will child care. In such transactions, less emphasis will probably take its toll on profitability, but there is still a solid flow of deal be placed on price. Instead, other factors seem more likely to opportunities on the Swedish market good enough to justify a dominate, such as the political ambition to privatize and the continued high level of activity. very lagom approach to bring as many employees as possible along on the privatization train.

So, now you know. “Lagom is best” as one Swedish platitude goes. Should you ever feel confused about what may be lagom in terms of your Swedish M&A-activity, please keep Cederquist in mind! And yes, we do also provide legal advice!

Nordic mid-market report 23 About Cederquist

Cederquist Advokatbyrå Management

Cederquist is a top-ranked business law firm which today is Jens Tillqvist, Managing Partner regarded as one of the leading firms within the M&A area in Petter Wirell, Partner and Head of M&A Sweden. Our M&A group comprises some 30 lawyers and offers the following services, among other things: Wilhelm Lüning, Partner and Head of Capital Markets & Securities • advice on strategy and tactics Svante Hultqvist, Partner and Head of Banking & Finance • target company analysis/due diligence

• project management Contact • administration of bidding and auction procedures

• prospectus preparation and review Cederquist Advokatbyrå Box 1670, SE- 111 96 Stockholm • negotiation and preparation of letters of intent, confidentiality undertakings and other pre-contract Petter Wirell, Head of M&A documents T: +46 8 522 065 00/15 M: +46 739 60 65 15 • negotiation and preparation of sale and purchase F: +46 8 522 067 00 documentation and related contracts E: [email protected] • advise in company law issues

In cooperation with Cederquist’s other practices, the M&A www.cederquist.se group also offers specialist expertise within areas such as capital market & securities law, labour law, corporate and commercial, real estate law, financing, intellectual property law, competition and public procurement law, tax law, as well as dispute resolution and risk management.

Cederquist represents both Swedish and foreign companies and businesses. Irrespective of the type of transaction involved, the firm’s clients can always look forward to a prompt and cost-efficient service of the highest quality.

24 Nordic mid-market report Historical analysis

Top 10 overall deals – YTD 2008

Announced Status Target Target Target Bidder Bidder Seller Seller Deal date company dominant dominant company dominant company dominant value sector country country country EUR (m) 27-Jun-08 C Svendborg Industrials Denmark Doughty United Kingdom SB Fyn Holding Denmark 460 Brakes AS Hanson & Co ApS 18-Jul-08 P Haegglunds Industrials Sweden Bosch Rexroth Germany Ratos AB Sweden 453 Drives AB AG 8-Jan-08 C Sonion AS Industrials Denmark Technitrol Inc USA Erhvervsinvest Sweden 385 Nord AS; Intermediate Capital Group; Nordic Capital; Polaris Management AS 26-Feb-08 C AGR Group Energy, Mining Norway Altor Oil Service Sweden 377 ASA (68.8% & Utilities Invest stake) 16-Jun-08 P C More Group TMT Sweden TV4 AB Sweden ProSiebenSat.1 Germany 320 AB Media AG 25-Mar-08 C Aker Yards Industrials Norway FLC West Luxembourg STX Europe Norway 292 Ukraine Holding ASA AS (70% stake) 22-Feb-08 P Nord Pool Financial Norway OMX AB Sweden Nord Pool ASA Norway 273 Clearing ASA; Services Nord Pool Consulting AS; Nord Pool International 6-Feb-08 C Alpharma Pharma, Norway 3i Group plc United Kingdom Alpharma Inc USA 270 Active Medical & Pharmaceutical Biotech Ingredients business 22-Jul-08 P Gunnebo Industrials Sweden Segulah Stellata Sweden 250 Industrier AB Holding AB 21-May-08 P Kemira Oyj Industrials Finland Kemira Oyj/ Germany Kemira Oyj; USA 250 (TiO2 business); Rockwood Rockwood Rockwood Holdings Inc Holdings Inc Holdings (joint venture) Inc (titanium dioxide and functional additives business)

Nordic mid-market report 25 Historical analysis

Top 10 private equity deals – YTD 2008

Announced Status Target Target Target Bidder Bidder Seller Deal type Deal date company dominant dominant company description company value sector country EUR (m) 27-Jun-2008 C Svendborg Industrials Denmark Doughty UK based private SB Fyn Holding IBO 460 Brakes AS Hanson & Co equity firm ApS 18-Jul-2008 P Haegglunds Industrials Sweden Bosch Rexroth German provider Ratos AB Exit 453 Drives AB AG of relevant drive, control and motion technologies 08-Jan-2008 C Sonion AS Industrials Denmark Technitrol Inc US based Erhvervsinvest Exit 385 manufacturer Nord AS; of electronic Intermediate components, Capital electrical contacts Group; Nordic and assemblies Capital; Polaris Management AS 26-Feb-2008 C AGR Group Energy, Mining Norway Altor Oil Service A newly IBO 377 ASA (68.8% & Utilities Invest established stake) company for the acquisition of AGR Ability controlled by Altor 2003 fund and Altor fund II 06-Feb-2008 C Alpharma Pharma, Norway 3i Group plc UK based private Alpharma Inc MBO 270 Active Medical & equity and venture Pharmaceutical Biotech capital firm Ingredients business 22-Jul-2008 P Gunnebo Industrials Sweden Segulah Stellata Sweden based IBO 250 Industrier AB Holding AB vehicle created by segulah advisor AB 30-Apr-2008 P Cision AB TMT Sweden Cyril Acquisition Sweden based IBO 232 AB investment holding company of Triton Fund II 19-Mar-2008 C Elfa AB Industrials Sweden Daetwyler Switzerland based IK Investment Exit 226 Holding AG industrial supplier Partners and distributor Ltd; Jensen of technical family (private and electronic investor) components 31-Jan-2008 C Finn-Power Oyj Industrials Finland Prima Industrie Italy based The EQT III Exit 170 SpA developer, fund manufacturer and marketer of industrial products 24-Jan-2008 C Tojeksperten Consumer Denmark Polaris Private Danish private IBO; Buy & 121 Equity II KS equity fund Build of Polaris Management AS

26 Nordic mid-market report Nordic mid-market (€50m - €500m) M&A trends

50 10,000

40 8,000 V alue of deals (EURm )

30 6,000

lume of deal s Vo 20 4,000

10 2,000

0 0 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008

Sector split of Nordic mid- Sector split of Nordic mid- market M&A 2008 YTD: volume market M&A 2008 YTD: value

2% 3% 3% 2% 1% 3% Industrials 3% Industrials 28% 34% 3% TMT TMT Energy, Mining & Utilities 5% Energy, Mining & Utilities Consumer Consumer Financial Services Financial Services 6% Transportation 7% Transportation Business Services Pharma, Medical & Biotech Construction Business Services 6% Pharma, Medicals & Biotech Construction Agriculture 7% Agriculture Other 24% 9% 8% 17%

12% 14%

Nordic mid-market report 27 Historical analysis

Nordic mid-market deal analysis Activity this year so far in the mid-market may have slightly slowed from H2 2007, but despite this there is an air of conservative optimism in the Nordic mid-market space. It is clear that large scale acquisitions are the hardest hit by the economic crisis currently gripping the UK and the US, leaving the Nordic mid-market to continue M&A activity relatively scathe-free. Additionally, the Scandinavian banks’ lack of exposure to the sub-prime debacle has given them a stronger balance sheet to provide acquisition finances, another factor which has cushioned the impact on the Nordic mid-market from the credit crisis.

In the Nordic mid-market H1 this year there have been 34 The second largest mid-market deal in the Nordic region deals at a total value of €5.1bn. In H2 last year there were this year was a private equity exit. The deal involved 45 deals at a total value of €7.5bn. By sector Industrials Technitrol, the listed US-based engineering and electrical was the strongest, with the largest deal in the sector being company, which agreed to acquire Sonion, the Denmark FLC West’s, the Luxembourg based investment company, based developer, manufacturer and supplier of electrical agreement to acquire a 70% stake in Aker Yards Ukraine components, from a consortium of private equity firms Holding, the Norway based ship building company, from which included Nordic Capital and Polaris Private Equity, Aker Yards ASA for €291.9m. Despite the deal being the Sweden and Denmark based private equity firms, Nordic based, the bulk of the business activity will occur respectively. Sonion was acquired by this private equity in the Russia and the deal is expected to “meet the consortium in April 2000, and in the past eight years grown growing demand by Russian companies in hydrocarbons its revenues by 13% p.a. President and CEO of Sonion, exploration, production and transportation for specialised Peter Scheel said Technitrol has been looking into adjacent ships,” according to an Aker Yards press release. The deal markets, and Sonion’s development over the past few years took a long period to receive confirmation from Ukraine has made the two companies a good match. Technitrol paid competition Authorities. However, the transaction was €385m for Sonion. completed on the 29 July 2008. In total the Industrials Behind this, the next highest deal also fell into the private sector saw 10 deals at a total value of €1.7bn. equity realm, with Altor Oil Service Invest, controlled Private equity seemed to play a dominate role in the mid- by Swedish private equity group Altor Equity Partners, market space, with the top three deals all encompassing offering to buy the remaining shares in AGR Group, the private equity involvement. The largest deal by value was listed Norwegian provider of well drilling and pipeline Doughty Hanson & Co’s, the UK based private equity firm, inspection services. Altor Oil announced on 26 February agreement to acquire Svendborg Brakes, the Denmark it was acquiring 13,367,700 shares, which equates to based supplier of brake systems, from SB Fyn Holding ApS, approximately 11.7% of the shares outstanding in AGR the Denmark based holding company having interest in Group at a price of NOK40.00 (€4.99) per share. Prior to this companies providing braking solutions, for €460m. Altor Oil (together with related parties) owned 21,971,328 shares (approximately 31.2% of outstanding shares) in AGR. Hugo Maurstad, Chairman of Altor Oil Service Invest said, “We believe that AGR has an attractive growth Nordic mid-market buyouts trends outlook but that there is a significant amount of work, time and investment needed to fully realize the potential. We 12 3,000 look forward to conducting this work in partnership with management and the other shareholders going forward.” 10 2,500 Other private equity deals include Alpharma Active

V Pharmaceuticals acquisition by 3i Group for €270m and

8 2,000 alue of deals (EURm ) Cision’s acquisition by the Swedish investment holding company of Triton Fund II, Cyril Acquisition, for 232m. 6 1,500 €

lume of deal s Vo The Cision deal fell into the TMT sector which, behind 4 1,000 Industrials, this was the second most active sector with 8 deals at a total of €876m. In the media space Cyril 2 500 Acquisition, the Sweden based acquisition vehicle owned by Triton Fund II, the fund of Triton Partners, the UK based 0 0 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 private equity firm, made an offer to acquire Cision, the

28 Nordic mid-market report Nordic mid-market exit trends to movements in gas prices through securing additional upstream assets. Centrica expects additional investments

12 2,500 of approximately £125m to maximize the reserve of 165bn cubic feet equivalent. The transaction is expected to be 10 subject to Norwegian regulatory approval and to close by 2,000 early fourth quarter of 2008. V

8 alue of deals (EURm )

1,500 The Consumer sector did not make the top deals chart, but it was a stone’s throw away with Stena Adactum, a 6 wholly owned subsidiary of Stena, the Swedish company

lume of deal s Vo 1,000 involved in ferry lines, shipping, offshore drilling, recycling 4 metal and steel, property and finance, agreeing to acquire

500 2 Ballingslov International, the listed Swedish manufacturer of kitchen fixtures and bathroom products, for€ 231m.

0 0 This comes just behind the Marathon Oil deal at €231m. Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Other deals in the Consumer space include Polaris Private Equity II K/S, the Danish private equity fund of Polaris listed Swedish media company, for SEK20 per share Management, the Danish private equity firm, agreement to (€2.14), valuing the company at SEK1490.9m (€159.4m). acquire, Tojeksperten, the Danish men’s clothing chain, for More recently, TV4 AB, the Sweden based operator of TV €€120.8m. Tojeksperten will be merged with Wagner, the channels, agreed to acquire C More Group AB, the Sweden Danish Menswear group and a portfolio company of Polaris based TV broadcasting company, from ProSiebenSat.1 and consequentially expand its retail operations in the Media AG, the listed Germany based broadcasting company, Nordic Region. Polaris has offered cooperative owners in for SEK3bn (€320m). At time of writing, the closing of the Tojeksperten to become co-owners of the new chain, while transaction is still subject to approval by antitrust authorities. those not initially wishing to sell would be offered franchise The Energy sector appears to be a strong area for the agreements which would provide them with access to a Nordic region currently. Recently, E.ON AG, the listed broader product range and improved marketing. German company involved in energy, utilities, chemicals In healthcare, the theme of private equity continues with the manufacturing, oil and gas production, real estate, and management of the Active Pharmaceutical Ingredients (API), telecommunications, has agreed to acquire the remaining the Norway based pharmaceutical business of Alpharma, 44.6% stake it does not own in E.On Sverige, the Swedish the listed US based pharmaceutical company, agreeing to power and gas company, as well as a hydropower plant acquire the business in a management buy-out transaction located in Sweden from Statkraft, the Norwegian power backed by 3i, the listed UK based private equity firm, for generation company, approximately €4.5bn. E.On is tipped approximately $395m (€270m). to make further investments in the Nordic Energy sector. Certainly it seems the health of the Nordic mid-market In the mid-market Energy space there have been five deals arena is still in tact despite the ailing wider economic worth a total of €976m from the 1 January to the 20 August impacts. It has been reported that David Ramm, partner at 2008. The largest of these being the Alter Oil Service deal, Ernst & Young in Stockholm, said of the Nordic mid-market discussed above. Other deals include Centrica’s, the listed space in early August this year “We’ve seen fewer larger UK based energy company, agreement to acquire interests transactions, but mid-sized deals have been holding up in a package of gas and oil producing fields, from Marathon well.” In the upcoming 12 months the Nordic mid-market Oil Corporation, the listed US based energy company, could prove to be an M&A hunting ground for financial for $375m. The acquired assets include a 23.8% interest investors looking to increase their portfolio or market share. in the Heimdal field, a 46.9% interest in Vale and a 20% Given the strong presence of private equity in the space in interest in Skirne/Byggve, all of which are producing fields. H1, it is perhaps likely that this trend will continue into the Centrica will also acquire interests in the Heimdal East and full year, as private equity look to a region more robust in the Peik discoveries which could be developed by 2012. The midst of the sub-prime rollout. deal is expected to allow Centrica to reduce its exposure

Nordic mid-market report 29 Part of The Mergermarket Group www.mergermarket.com

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