Nordic Companies a Magnet for Foreigners as Europe Stalls
Companies shopping for businesses in Europe are hot on the Nordics, cool on their southern neighbors.
Sweden, Norway, Denmark, Finland, and Iceland have seen about $288 billion in deals since the financial meltdown began in 2007, according to data compiled by Bloomberg. That puts the region, with a population of about 26 million, well ahead of countries such as Spain, which has about 47 million people, and Italy, with about 61 million.
“If I’m selling a business with lots of exposure to France, the interest goes down fast,” said Kristian Terling, who handles the Nordic business for Los Angeles-based investment bank Houlihan Lokey. “I say ‘Sweden,’ the mood softens.”
Sweden’s economy has grown by more than 10 percent since 2009, according to government records. While Sweden’s growth for 2012 is projected to have slowed to 0.9 percent, it’s still expected to beat the euro region, which is contracting. All of the Nordic countries boast triple-A credit ratings and the region overall is projected to expand by 2.1 percent this year.
“The countries are very well established with good growth records, they speak English, and they have stable politics,” says Pip McCrostie, global vice chair of transaction advisory services at Ernst & Young, based in London. “Money always flows to the safe haven when it’s looking to avoid risk.”
Foreign buyers are especially drawn by the global footprint of the region’s companies.
“Many Nordic-headquartered businesses have specific technologies and products with global reach,” says Tom Bernhardsen, a director at Credit Suisse Group (CSGN)’s investment bank handling Nordic countries and energy services.
In December, Deerfield, Illinois-based Baxter International (BAX) agreed to pay about $4 billion to acquire Swedish medical- equipment maker Gambro, which has 13 production facilities in nine countries and sales in more than 100 nations.
That same rationale applies to speculation of an eventual takeover of Finnish mobile-phone maker Nokia Oyj (NOK1V) by Microsoft Corp. (MSFT), which already collaborate on smartphones, analysts and bankers have said. Another deal that could break: Nokia Siemens Networks, Nokia’s equipment joint venture with Siemens AG, may reignite takeover interest after the company topped Nokia’s earlier quarterly estimates, analysts said.
Among the Scandinavian countries, Sweden draws the most buyers, with $113 billion of acquisitions since 2007 by companies with headquarters abroad, followed by Norway with $95 billion, according to data compiled by Bloomberg. About 631,000 Swedish companies, amounting to more than 20 percent of the country’s private sector, were owned by foreign companies in 2011, compared with less than 5 percent in 1980, according to a report from the country’s official statistics bureau.
Stefan Folster, chief economist at the Confederation of Swedish Enterprise, said the country appreciates the new capital, ideas, and markets that come with foreign ownership.
“The history of Volvo Cars is a very good example of a company people believe wouldn’t have survived had it remained Swedish,” he said.
Ford Motor bought Volvo in 1999, then sold it to China’s Zhejiang Geely Holding (175) Group in 2010. There’s been little opposition to the fallout from cross-border deals in Scandinavia, in contrast to increasing protest elsewhere in Europe, says Folster. Volvo saw minimal resistance when it cut production in Sweden while seeking to expand operations in China.
Acquisitions by Nordic buyers in 2012 fell 42 percent from 2008 levels, to $45 billion, according to Bloomberg data, even though Scandinavian companies hold about $103 billion of cash, 30 percent more than they did four years ago.
“They have the financial strength for deals but are worried about the economic outlook,” Terling, of Houlihan Lokey, said.
One company that may look outward is Statoil ASA (STL), Norway’s biggest energy explorer and 67 percent-owned by the government. It’s hunting for targets in the U.S., people familiar with the company have said. It would have the financial muscle to pursue companies such as EOG Resources Inc. (EOG), a $34 billion Houston- based crude oil producer whose chief executive officer, Mark Papa, is retiring in June, analysts said earlier this year.
Meanwhile, local companies are showing no skittishness in acquiring one another -- for the same reasons that attract foreign buyers. Fiskars, a 363-year-old Finnish maker of kitchenware, agreed to buy Danish porcelain maker Royal Copenhagen (RBREW) in December for 66 million euros ($89 million) in a push to become more global, said Kari Kauniskangas, Fiskars’s chief executive officer.
“We’ll build on Royal Copenhagen’s position in Asia, and can access new markets such as central Europe,” he said.
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