ABG Sundal Collier Holding ASA (ASC), a Norwegian investment bank, expects a slump in stock market valuations to boost mergers and acquisitions this year.
“It looks like we’ll see as many deals this year as we saw last year,” when there were 70, ABG Chief Executive Officer Knut Brundtland said in an interview in Oslo. “There are many companies with good balance sheets and lots of cash and they’re looking for expansion as it’s hard to grow organically.”
ABG’s team of 50 investment bankers in Norway and Sweden aims to generate 100 million kroner ($18 million) to 125 million kroner of corporate finance revenue a quarter, said Brundtland. Companies looking to increase revenue may take advantage of the low valuations, he said.
There have been 301 mergers and acquisitions in Sweden and Norway, ABG’s main markets, this year, according to Bloomberg data. The price to earnings-per-share ratio of Norway’s 26- company OBX Index fell 44 percent to an average of 8.45 percent this year, while the 30-member OMX Stockholm 30 dropped 45 percent to 9.94.
“We are seeing more interest in public to private deals, in Sweden and Norway because of the low prices on the stock exchange and valuations are low,” Brundtland said. “Industrial players can pay more than the price on the stock exchange so there’s plenty of room for huge takeover premiums.”
Debt restructuring deals may also pick up as companies struggle to pay outstanding loans because of the high cost of refinancing, while the market for initial public offerings remains closed even though there are a number of potential projects, he said.
ABG, formed in 2001 via the merger of Sundal Collier & Co. and ABG Securities, has more than 290 partners with offices in Oslo, Bergen, Stockholm, Gothenburg, Copenhagen, Frankfurt, London and New York. ABG is considering a “presence” in Finland, Brundtland said.
The company, which posted a 42 percent drop in second- quarter net income to 35.5 million kroner, was involved with Hoegh LNG’s IPO this year, plus Eitzen Chemical ASA’s private placement and Visma AS’s purchase of Mamut ASA.