F&P Quarterly: 2019 at a glance – Selective sectors will prosper in turbulent times

As we are approaching the end of 2018, we can summarise an intense year for Fogel & Partners. We are delighted to have advised on a record number of transactions during the course of the year, and we would like to thank all of our clients and partners for great collaborations.

 

Looking into 2019, we see both clouds and sunshine on the horizon. How big implications will a weaker stock market, rising interest rates, and fear of global trade disputes have on deal activities in the Nordic region. We have talked to a few investment bankers in Stockholm with the objective to capture their views on the year that lies ahead. Despite some market turbulence, the combined view portrays selective opportunities for 2019.

One observation is that we can expect a somewhat weaker market for 2019 following a strong 2018: “We see a strong deal flow from private equity since many companies have strong cash flows combined with remaining low interest rates. Private equity driven transactions are more predictable and are not as affected by the turbulence on the stock market”, according to one banker.

The market is partly driven by strong demand from private equity and their increased activity, both on the buy and sell side: “But we expect increased activity from corporate-driven deals as well. Those are often driven by growth ambitions, and when organic growth is harder to accomplish, growth-driven acquisitions are tempting. Especially companies with a strong acquisition track record, who have been rewarded by the stock market”.

The digital transformation affects all companies, but the obstacles that many traditional companies face in order to make the digital leap are often underestimated. To face this, several companies are looking into acquiring digital expertise and business development knowledge, which is why the digital transformation will likely continue driving M&A activity going forward.

But there is also optimism about the IPO prospects, and there is an expectation that quality companies will go for an IPO during 2019, despite a challenging stock market. Nonetheless, it takes a lot to go public in the current market climate. Investors are more selective and perform more in-depth reviews of the companies. The recent Nordic IPO outlook from Mergermarket headed “Market turbulence dims IPO prospects to all but exceptional candidates”, highlights that the IPO window has narrowed but that there might be some strong candidates that make it through the needle’s eye.

In conclusion, selective sectors are likely to drive the M&A market with new deals, especially in real estate, technology and life science. And we might see a handful of quality candidates going public.

The team at Fogel & Partners would like to take the opportunity to wish you a happy holiday and look forward to continued collaboration in 2019.

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