Transaction Trends Danish M&A Activity Overall Resilient To

Transaction Advisory Services Transaction Trends Danish M&A update – Q2 2019

Danish M&A activity overall resilient to geopolitical turmoil – for now

Transaction Trends, published by EY Transaction Advisory Services, is a quarterly publication that aims to identify trends in the Danish transactions market. Data presented in this newsletter cover all transactions announced and registered in Mergermarket where Danish companies have participated as either target, buyer or vendor.

During the second quarter of 2019, Mergermarket reports that global Danish companies announced a total of volumes were slightly below the levels Last Twelve Months Number of 73 transactions. This is 16 deals less observed in 2017, making 2018 the Transactions by Industry than in the previous quarter and 18 first year-on-year decline in global deal Source: Mergermarket deals less than last year’s second volume since 2010. This trend has quarter. The main driver is the continued for the first quarters of Automotive & decreased activity in cross border 2019. 17 Transportation deals. Domestic deals refer to deals where Business & Prof. In terms of activity by industry, TMT Services 38 both, target and buyer are based in and Engineering & Industrial Products Denmark. Cross border deals, on the Consumer saw the highest deal activity (13 and 17 Products 41 other hand, involve at least one party respectively), while the runner-ups being from outside of Denmark Engineering & Consumer Products and Business & Ind. Products 79 (inbound and outbound deals) Prof. Services accounted for 8 deals. Financial Services 17 The overall number of deals in the Government& Danish market in the LTM period 2Q19 0 Public sector were 357 compared to 342 in LTM 2Q18. Life Sciences 22

Oil & Gas 0 Number of Transactions Source: Mergermarket LTM 116 Power & Utilities 19 120 112 400 100 100 91 90 41 91 89 80 83 48 300 Real Estate 23 80 73 71 34 73 30 34 29 27 38 25 60 28 24 29 200 Retail 0 40 75 61 66 58 64 60 100 45 56 47 53 53 44 TMT 85 20 0 0 Travel, Leisure & 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Tourism 16 Domestic Cross Border LTM Key highlights and market outlook

On 01 April, DSV A/S, the Denmark-based freight and Over the last quarter, the Danish market experienced 73 logistics company, announced the acquisition of Panalpina deals. While this is lower than deal volumes seen in the last WeltTransport Holding AG, the Swiss transport and logistic quarter and last year’s second quarter, it is only slightly company, for a consideration of USD 4,742m. The lower than the average quarterly deal volumes for the past transaction enables DSV to increase their revenue by close four years. On a quarterly as well as on an LTM basis, the to 50%, which will rank them in the industry-wide top four market has been driven by transactions within the sectors and strengthen their Air & Sea division substantially. Engineering & Industrial Products (2Q19: 13; LTM: 79 deals) and TMT (2Q19: 17; LTM: 85 deals). On 03 April, Francisco Partners, the US-based private equity firm, has announced to acquire EG A/S, the Denmark-based In spite of rising geopolitical and regulatory concerns, EY’s provider of proprietary software solutions, from the Global Capital Confidence Barometer indicates that the Denmark-based private equity firm Axcel Management A/S. overall appetite for deal-making will continue to be strong in The transaction enables EG to further develop and grow the 2019. As for Denmark, we see a robust pipeline of deals business organically and through add-on acquisitions by and expect continued momentum for M&A in 2019. leveraging Francisco Partners’ expertise. On 11 April, Nykredit Realkredit A/S, a Denmark-based provider of banking and mortgage lending services, announced the acquisition of LR Realkredit A/S, a Denmark- based provider of mortgage loans. The acquisition enables growth in Nykredit’s lending in areas where it has very On 28 June, an investment consortium including the Denmark- strong expertise and strengthens Nykredit’s regulatory based founding family of Lego (Kirkbi) announced the acquisition capital position. Under single ownership, LR Realkredit A/S of Merlin Entertainments Plc, the UK-based leisure and seeks to develop and expand its business further and utilize entertainment company focused on the development of existing assets more effectively. attractions and theme parks, for a consideration of USD 5,807m. The deal is ought to enable Merlin’s management to focus on and On 20 May, Stark Group A/S, a Denmark-based retailer and execute their strategic vision for the business. distributer of timber and building products, announced the acquisition of Saint-Gobain Building Distribution Deutschland GmbH, a Germany-based distributer of building products, for a consideration of USD 374m. The acquisition enables Stark to expand in the European market and creates significant value for its customers and owners.

Top announced transactions last quarter (by deal value, USDm) Source: Mergermarket, CVR Virk Deal Dom. Deal Target Ann. Date Target Vendor Buyer Industry Value* Turnover

Kirkbi - Blackstone - Travel, Leisure & 28 Jun Merlin Entertainments Plc (71.08% Stake) Listed USD 5,807m USD 2,142m* CPPIB consortium Tourism

Automotive & 01 Apr Panalpina WeltTransport Holding AG Listed DSV A/S USD 4,742m USD 6,144m* Transportation

03 Apr EG A/S Axcel Management A/S Francisco Partners TMT USD 557m DKK 1,221m

Skandinaviska Enskilda Banken AB; Nykredit Realkredit 11 Apr LR Realkredit A/S Danske Bank A/S; Nordea AB; Jyske Financial Services USD 393m DKK 526m A/S Bank; Arbejdernes Landsbank A/S

Real Estate, Saint-Gobain Building Distribution 20 May Compagnie de Saint-Gobain SA Stark Group A/S Hospitality & USD 374m USD 2,205* Deutschland GmbH Construction *Mergermarket definition ** 2017 2 | Transaction Trends 1st edition 2019 Activity Breakdown

In the second quarter of 2019, 49 of 73 deals (67%) were made by Danish buyers. In the LTM period, 63% of all bidders Buyer Region – Danish and Foreign Targets Source: Mergermarket were Danish. The absolute number remained at a constant level (49 in 2Q19 vs. 50 in 1Q19). The decreasing share of Q2 2019 LTM foreign buyers mainly corresponds to a decrease in buyers 0% 2% 8% 7% from Asia-Pacific. Deal appetite in the Americas remained at a 0% 0% 12% similar level as observed over the LTM period. 15%

The share of private deals decreased from 72% to 60% in the 12% second quarter of 2019 and is also lower than in the LTM 12% 63% 67% period (71%).

The decrease in the share of cross border deals in 2Q19 (60%) indicates that Danish companies are more cautious with cross Denmark Americas border M&A facing trade tensions and protectionism. Nordics (excl. Denmark) Asia-Pacific However, 59% of the cross border deals have been outbound Europe (excl. Nordics) Other compared 41% in the LTM period, demonstrating an interest in foreign targets.

Transaction Type by Volume Source: Mergermarket Domestic Cross Border

Q2 2019 40% 60%

LTM 37% 63%

2016 - YTD 37% 63%

Note: Domestic deals refer to deals where both target and buyer are based in Denmark. Cross border deals involve at least one party being from outside Denmark (inbound and outbound deals)

Transaction Arena by Volume Source: Mergermarket Public Private

Q2 2019 40% 60%

LTM 29% 71%

2017 - YTD 28% 72%

Note: Public deals refer to deals where either target or bidders is public, i.e. a listed company Transaction Trends 1st edition 2019 | 3 4% 5%

Activity Breakdown

The share of Danish targets (acquired by foreign and Danish buyers) decreased slightly from 76% (1Q19) to 73%. Target Region – Danish and Foreign Buyers Source: Mergermarket Throughout the past three years, this percentage has remained at a similar level, mainly fluctuating between 70% Q2 2019 LTM and 80%. In the LTM period, the share of Danish targets is at 5% 6% 0% 0% 1% 74% and therefore, slightly below average since 2016 (77%). 14% 0% 13%

The share of American targets (5%) in the second quarter 8% 7% remained at a high level compared to the average since 2016 (4%), while being slightly lower than in the LTM period. The level of Nordic targets (excl. Denmark) has slightly recovered 73% 74% from the previous lowest quarterly percentage (8% in 2Q19 vs. 4% in 1Q19).

Denmark Americas Engineering & Industrial Products as well as TMT were the Nordics (excl. Denmark) Asia-Pacific industries showing the highest activity in 2Q19, while Travel, Europe (excl. Nordics) Other Leisure & Tourism indicates the highest QoQ-growth amongst all industries (200%).

Activity by Target Industry – Domestic and Cross Border Deals Source: Mergermarket

Number of Transactions

Target Industry Q2 2019 LTM 2018 Avg. 2016 – 2018 Trend indicator

Automotive & Transportation 5 17 24 22

Business & Professional Services 8 38 43 42

Consumer Products 8 41 53 58

Engineering & Industrial Products 13 79 73 70

Financial Services 2 17 23 20

Government, Public sector & Organisations 0 0 0 0

Life Sciences 5 22 21 25

Oil & Gas 0 0 0 0

Power & Utilities 2 19 16 14

Real Estate, Hospitality & Construction 7 23 25 20

Retail 0 0 0 0

TMT 17 85 91 80

Travel, Leisure & Tourism 6 16 17 13

Total 73 357 386 364

Note: Trend indicators refer to the comparison between the LTM vs. the avg. 2016 – 2018 number of transactions

4 | Transaction Trends 1st edition 2019 Public Market Update

Nasdaq Copenhagen (“CSE”) saw four new listings in the New listings at Nasdaq Copenhagen Source: Nasdaq Nordics second quarter of 2019, one on the Main market and three on First North. Main market The companies listed were Maersk Drilling A/S (April 4) on the 2 First North Main market and Konsolidator A/S (May 10), Waturu A/S (May 20) and Danish Aerospace Company A/S (May 27) on First North. The amount of equity capital raised in YTD19 amounted to DKK 24.2bn compared to DKK 11.2bn in 2018. This is primarily driven by the spin-off of Maersk Drilling (DKK 23.9bn). 3 3 9 1 The OMXC20 decreased by approximately 1% during the second quarter, subsequent to an increase of 14% in the 2 3 3 3 previous quarter. Domestic markets seem to be robust to the 2 2 1 current rise of political uncertainty and rising interest rates. 0 0 Going forward, the interest rate developments, and the 2013 2014 2015 2016 2017 2018 YTD19 potential continuance of market turmoil, will be key items to follow.

Issues by value, Nasdaq Copenhagen Foreign exchange rates (indexed) Source: Capital IQ, Mergermarket Source: Capital IQ Private Placement IPO 1.3 SEO Spin-Off/Split-Off 1.2 Buyback DKK/USD 1.1 80 76.4 70 1.0

60 56.4 0.9 DKK/GBP 49.1 48.5 50 45.3 0.8 DKK/SEK 40 36.1 38.1 0.7 30 20 0.6

10 0.5 2013 2014 2015 2016 2017 2018 2019 0 2013 2014 2015 2016 2017 2018 YTD19 OMX C20 Index Avg. multiples of listed Danish companies Source: S&P Capital IQ Source: S&P Capital IQ 1.100 13.2x 1.000 11.3x 2018 900 EV/EBITDA 12.8x 2017 800 15.8x 2016 700 1.8x 2015 600 1.7x P/B 500 1.9x 400 2.6x 300 21.3x 200 19.7x P/E 100 21.2x 0 23.7x 2013 2014 2015 2016 2017 2018 2019 Transaction Trends 1st edition 2019 | 5 Contact list - EY Transaction Advisory Services Transaction Diligence

Søren P. Krejler Lars Lyster Sø[email protected] [email protected] +45 25 29 37 26 +45 30 70 04 12

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Valuation, Modelling & Economics

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Strategy and Operations Tech

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Global reach and local Transaction Tax presence with 10,000 transaction professionals Carina Maria G. Korsgaard Niclas H. Sonne [email protected] [email protected] +45 25 29 37 64 +45 25 29 39 97

About this publication

Transaction Trends is a quarterly publication that aims to identify trends in the Danish transactions market. Transactions covered in this publication are public About EY and private transactions announced by all Danish companies, defined as a EY is a global leader in assurance, tax, transaction where either the buyer, target or vendor company is a Denmark transaction and advisory services. The based company. Public transactions are defined as transactions where either the insights and quality services we deliver help build trust and confidence in the buyer, target or vendor company is listed on a public stock exchange. All other capital markets and in economies the transactions have been classified as private. Domestic transactions are defined world over. We develop outstanding as transactions conducted within a national boundary, i.e. deals involving two or leaders who team to deliver on our promises to all of our stakeholders. In more incumbent nationals, while cross border transactions involve companies doing so, we play a critical role in building from at least two different nationalities. Deal Value is taken as the sum of the a better working world for our people, for consideration paid by the acquirer for the equity stake in the target plus the our clients and for our communities. value of the net debt in the target, where applicable. Inclusion of net debt in the EY refers to the global organisation, deal value will depend on the stake acquired or the target company type. and may refer to 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 Transaction Statistics are based on Mergermarket and EY data. Public market UK company limited by guarantee, does data are sourced from S&P Capital IQ and Nasdaq. not provide services to clients. For more information about our organisation, please visit ey.com. Transaction Trends is published by EY Transaction Advisory Services.

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.

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