Key take-aways

The sectors with the largest representation in Norwegian deals in H1 2022 was Technology (48), followed by Business services (33) and Construction (28), with the highest deal values being in Aquaculture (€8.5bn), Energy (€2.8bn) and Technology (€2.3bn).
Private equity continues to account for a swelling proportion of deal activity in Norway, including a significant percentage of the largest deals. Once again there was a strong PE representation in the top 10 largest deals to close in H1 2022.
The largest overseas investor nations have a familiar look with Sweden (44), the US (12) and the UK (9) taking the top three spots, with the UK ranked number one by deal value (€1.29bn).
There continues to be a prominent-looking pipeline for Norway’s ESG, technology, energy and infrastructure sectors.
Initial public offerings completed on the Oslo Stock Exchange have decreased with only one completed in the H1 2022 compared to five initial public offerings in H1 2021.
Euronext Growth has also dropped off, with seven listings in H1 2022 compared with 45 in H1 2021. The Oslo Stock Exchange has slowed on a less dramatic level, with eight listings, compared with 12 in the same period in 2021.
Stable development in uplistings from Euronext Growth to the Oslo Stock Exchange, with five of the eight listings on the main board in 2022 being transfers from the secondary market, compared to seven in H1 2021.
Capital markets listings largely reflect the established sectors in Norway, with technology, shipping and oil & gas and oil & gas services being the most active. Within technology, three were clean technology, and three were health technology.
Pipeline for IPOs and Euronext Growth listings is promising for H2 2022, and is expected to be increase from the first half of 2022, subject to prevailing market conditions.

Deal activity remains high in spite of market volatility

Deal volumes across 2021 were exceptional in Norway, as in other markets, with deal numbers and values hitting unprecedented levels. Transitioning into early 2022, we saw deal volumes continuing to remain buoyant with high levels of capital available. In our most recent quarterly international newsletter – Norway International Update – Q1 2022 – in early April, we suggested that significant transaction activity was likely to continue despite market volatility and that some underlying trends, such as the availability of capital and strong appetite from private equity and corporate investors, would remain, although with some uncertainty relating to interest rate increases and increasing inflation. Whilst high quality assets are available, there are buyers that will pay for them. To date, this has largely been accurate with significant deal activity and processes continuing in Norway against the backdrop of the ongoing conflict in Ukraine and significant global market volatility, which remains an ongoing threat to the broader economic outlook and on deal activity generally. In 2022, Norway and the Nordics has seen robust deal activity, with deal tables suggesting less of a downturn in activity than in some other regions and jurisdictions. We have not seen inflation at the levels of other nations in Norway, but it is anticipated, and this remains a factor that is likely to impact the markets.

Private equity firms continue to be active in Norway and the Nordics. Not so long ago, attention was focused on France, Germany, and the UK with the Nordics having its own ecosystem of Nordic investors. Today, there are more international PE firms – particularly from the US – than ever before and that is creating extra competition for established Nordic investors who have long enjoyed their advantageous position, but now must compete heavily for the best assets. As well as its political stability, highly educated workforce and well-established legal framework for M&A transactions, Norway also offers significant opportunities to invest in high quality technology and software assets.

Another major draw for the Norwegian and Nordic market is a more sophisticated and professional mid-size market with companies below the tier of the largest companies increasingly seeking more complex advice and being involved in more M&A. The increased dynamism and ambition of these companies is also making large global funds take notice.

Technology and energy continue to lead the way in M&A, joined by aquaculture, as sustainable aquaculture continues to grow at a rapid pace in Norway, with recent technological innovations and regulatory developments in Norway assisting with growth. Aquaculture is the fastest growing food-producing sector in the world and Norway is Europe’s largest fisheries and aquaculture nation. For ESG assets, green technology companies are still in very high demand, with the legislation incorporating the EU Taxonomy Regulation’s requirements into Norwegian law expected to enter into force in autumn 2022, which is increasing the promotion of sustainable investments.

Figure 1: Top 10 deals with Norwegian targets in H1 2022 by deal value

Looking at the most active sectors, the most active and highest grossing sectors maintain a familiar feel with Technology (48), followed by Business services (33) and Construction (28) rounding out the top three and the highest deal values being in Aquaculture (€8.5bn), Energy (€2.8bn) and Technology (€2.3bn). Demand for the best technology assets continues, both for consolidation and for business transformation purposes. The most notable surge was in the aquaculture sector, a particularly Norway-centric sector, which is referred to above.

Figure 2: Norway H1 2022 deal count and value by sector

Cross-border deal activity in Norway has increased further, with 73.1% of all deals involving a Norwegian target having a cross-border element. In the sectors with significant activity we have seen 79% of business services and 71% of energy, mining and utilities deals by value respectively being cross-border, whilst at the lower end of the sectors with significant deal activity, around 54% of Construction and 56% of Industrials and chemicals deals were cross-border. In terms of acquisition of Norwegian targets by foreign owners, we have seen a slight dropoff from 2021, from 47, to 41.6% in H1 2022. For overseas investment into Norway, the ‘big three’, Sweden, the US and the UK retain their positions in the top three, reflecting their position as Norway’s strongest long-term trading partners with Norway. The UK has swapped positions with the US and ranks number one by deal value, with deals totalling €1.29bn.

Figure 3: Top 5 deals and bidders by deal numbers and value

Private equity has increased its footprint in Norway even further, recording the highest number of deals in any H1 on record, with 51 PE deals involving a Norwegian target so far this year, worth €3.4bn in total. Three of the top ten M&A deals by value involved a PE buyer or seller. This includes Visma’s c. €800m sale of its IT consulting business to CVC Capital Partners and Apax Partners’ c. €400m acquisition of EcoOnline Holding.

Figure 4: Private equity / VC deal count by sector, based on any party being PE / VC and Norwegian target/buyer/seller

We have started to see the re-emergence of public-to-private (P2P) transactions as a trend in the last quarter, with several major deals announced so far in 2022. One particular week saw three P2P offers launched, and public takeovers are increasingly being considered, particularly by large overseas private equity houses. In Q2 we also saw the first takeover of a Euronext Growth-listed company.

It continues to be impossible to confidently predict the direction of dealmaking activity, but we expect to see significant M&A activity in Q3 and Q4 in Norway. Corporates are looking beyond the current climate to focus on long-term strategy and growth, which is supported by access to capital. For private equity, the picture remains unchanged in terms of significant dry powder in the Nordics and further afield. It is realistic to expect an ongoing affected M&A environment in line with much of the world, with volatility and uncertainty, together with increased inflation, meaning funding will be more challenging for some acquisitions, and investors will apply extra caution when considering targets. This may result in more capital intensive projects struggling to get off the ground in the short term. Successful deals may take longer to complete.

As we have seen, some sectors will be more affected than others, with the need to target companies – both venture and startups and more established larger companies alike – with an ESG focus and a focus on tackling the climate crisis and sustainability being high on the investor agenda. Investors will also be prioritising businesses which are able to absorb or counter the effects of inflation and rising costs (such as materials, labour and transportation), for example through price increases, as this will have a significant impact on growth potential going forward.

Equity capital markets subdued after records highs of 2020 and 2021

In our most recent update on the IPO market in our Q1 international newsletter – Norway International Update – Q1 2022 – in early April, we commented that there was a considerable pipeline of companies looking to list in Norway, with many companies pushing back their planned listings from 2021. As of now, the story is repeated, with a number of anticipated H1 2022 listings opting to delay any process.

Norway’s IPO deal numbers for 2021 set a new benchmark, outperforming what was already a record year in 2020. In 2022, the numbers are significantly more subdued, with eight listings on the Oslo Stock Exchange main board, compared to 21 across 2021 (and 12 at H1 2021), and seven listings on the Euronext Growth market, aimed at small and mid-sized companies, which hit their peak in 2021 with 61 in total and 45 at H1 2021. The most notable listing to date in 2022 has been the NOK 8.9bn main board listing of Norwegian oil & gas company Vår Energi.

Initial public offerings completed on the Oslo Stock Exchange have decreased with only one completed in the H1 2022 compared to five initial public offerings in H1 2021. We have observed a significant increase in uplistings from Euronext Growth to the Oslo Stock Exchange, with five of the eight listings on the main board in 2022 being transfers from the secondary market. Many growth companies are committing to doing so within a year of their IPO, and are adopting this approach in order to expedite short-term access to capital and then, after a period of growth, secure larger investors more focused on companies on the main list. The fact that a majority of the companies that have uplisted have a market cap above NOK 2 billion (€200m) reflects this strategy. This is noteworthy as an uplisting is not necessarily dependent on or reflective of the market because no capital is normally raised, and it is more a question of fulfilling listing requirements. Accordingly, IPOs (not uplistings) and new Euronext Growth listings are a better measure of market activity and prosperity.

The sector breakdown of listings in 2022 largely reflects the predominant established sectors in Norway, with technology (eight transactions), shipping (three) and oil & gas and oil & gas services (three) being the most active. Notably, of the technology sector listings, three companies operate in clean technology, and three in health technology, which also follows a strong recent trend in Norway.

It should be noted that, in general, processes have been delayed rather than cancelled, and that it is not only market conditions responsible for the pushbacks, but also strategic measures, such as planning and executing further pre-IPO acquisitions, preparing carve-outs, or doing further preparation of the company. The general consensus is that the equity capital markets in Norway are going through a quieter period, which is to be expected with the global market volatility and uncertainty.

Figure 5: Euronext Growth and OSE listings

A regulatory change that may have some impact on the market for foreign issuers listing in Norway is the implementation of the Central Securities Depository Regulation (CSDR), an EU measure that came into force in Norway from 1 March 2022. Due to the systemic set up of VPS registrations for foreign issuers under the CSDR, the possibility for issuers incorporated in countries outside of the EU effectively made it challenging for certain jurisdictions to list in Norway. In 2022, there have been three listings on the OSE and Growth from issuers headquartered outside of Norway, from Denmark, Sweden, Bermuda, the US and the UK. The new regulatory requirements have created certain systemic barriers to entry, and it is uncertain whether this was intended or not. I will be interesting to see how the situation develops going forward.

Taking a glance ahead to the rest of 2022, and early 2023, whilst the market is very uncertain at this point, we are still expecting to see a healthy listing pipeline, with a preference for main market Oslo Stock Exchange listings, large carve-out IPOs and transfers on to the main market from Euronext Growth. Of these, a number are likely to be major listings of very large companies. We also expect to see a continued interest from international investment banks seeking opportunities in the region. Questions have been raised as to whether Euronext Growth listings are dead, but this may have been premature as we have recently seen an increasing number of incoming Euronext Growth deals. The second half of 2021, although much calmer than the first half, was more representative of a ‘normal’ year. The expectation was that H1 2022 would follow on from this, but the market has slowed down further. We are optimistic that the level of deal activity in H2 2022 will be more reflective of H2 2021 rather than H1 2022.

An eventful first half of 2022 in Norwegian merger control

The first half of 2022 has been an eventful period within Norwegian merger control, with one decision from the Competition Appeals Tribunal (the “CAT”) in the DNB/Sbanken-case and a judgement from the Court of Appeals in the Schibsted/Nettbil-case. Moreover, the competition authority has approved two cases subject to remedies. These cases confirm that the NCA’s active stance within merger control is likely to continue.

Cases where the NCA has been overturned

The DNB/Sbanken saga came to an end in March. The Norwegian Competition Authority (the “NCA”) had blocked the merger due to alleged adverse effects on the market for distribution of mutual funds to consumers. DNB appealed the NCA’s decision to the CAT, who reversed the NCA decision – allowing the transaction to go through. The CAT criticized the NCA for not sufficiently appreciating the competitive pressure from remaining competitors in the market. Indeed, the CAT held that the remaining market players could replace the competitive pressure from Sbanken.

Another case that has received considerable attention this spring is the Schibsted/Nettbil-case, where the Court of Appeals quashed the CAT’s and the NCA’s decisions to block the merger. The Court held that neither the CAT nor the NCA had established by the requisite legal standard that the transaction would impede effective competition, holding that the competition authorities had placed too much weight on the parties’ internal documents. The Court’s judgement has been appealed, and it is still pending whether the Supreme Court’s Appeals Selection Committee will grant certiorari.

Both the abovementioned cases give a clear message to the NCA that they will have to provide a more thorough and balanced review of all the facts in the case before deciding to block a merger. This might entail that the NCA in the future will consider a broader range of evidence, which in the later years has been heavily focused on internal documents to the detriment of economic analysis. It is, however, too early to predict these cases’ precise impact on the NCA future cases.

Approval decisions subject to conditions

The NCA has issued two approval decisions subject to conditions. The first case concerned Royal Unibrew’s acquisition of Hansa Borg. In this case, the NCA was worried that the transaction would impede effective competition in the market for cider and flavoured alcoholic beverages as it would entail a reduction from three to two large providers of the products in the market. Hence, it is not surprising that the NCA demanded commitments. The case was ended by Unibew offering to terminate certain distribution contracts.

The other case that was solved by commitments was the Nortura/Steinsland case. This case is relatively novel, as it concerned a vertical merger, where the NCA was worried that Nortura’s acquisition of Steinsland (one of two producers in Norway of day-old hatching chickens) would foreclose Nortura’s competitors in the downstream egg market. The case was resolved by the parties accepting behavioural commitments, requiring them to source eggs and sell day-old hatching chickens on non-discriminatory conditions.

The first case is quite traditional from a merger control perspective, but the latter case is a seldom example of the NCA investigating a vertical merger. However, the case seemed to raise issues since Steinsland and Nortura had significant market shares in their respective markets. Moreover, the case shows that behavioural commitments still are relevant in vertical cases.

Infrastructure M&A on the rise

In Norway, infrastructure investment is on the rise, driven by a range of factors, such as the ‘green shift’ and digitalisation. Infrastructure investments are expected to exceed EUR 200 billion over the next ten years in the Nordic region. Within the region, Norway is a relative latecomer, due to historic political sentiment favouring national control of critical infrastructure and strong public finances. In more recent times, private investments in infrastructure have gone up due to an increase in available unregulated assets, a shift in consensus from self-sufficiency to having capacity constraints, and the need for substantial investment in the (less well financed) municipal sector. To promote new green value chains, the Norwegian State is increasingly willing to engage in PPP arrangements and to subsidise new technologies. In turn, the growing market for private infrastructure investments has had a self-enforcing effect.

Infrastructure M&A has seen a particular surge in popularity in the last 12 months, and a number of infrastructure deals represent some of the largest M&A deals in Norway in H1 2022, including Infracapital’s acquisition of the remaining 30% interest in electric vehicle charging point operator Recharge AS from Fortum and a joint venture of Hafslund Eco, Infranode, and HitecVision acquiring Fortum Oslo Varme, Norway’s largest district heating provider. The joint venture behind the latter deal included a clear carbon capture target, which will be crucial for the City of Oslo to achieve its ambitious climate goals of reducing emissions by 95 per cent by 2030.

These trends and developments, as well as other energy transition and infrastructure development in Norway were recently discussed in our Wiersholm Infrastructure Seminar on 9 June 2022, where we also invited presentations from HitecVision, TrønderEnergi, Infranode, Infracapital and Aker Horizons.

Renewable energy M&A continues to attract international investment

High M&A activity within the renewable energy sector remains a consistent feature of the Norwegian M&A landscape.

There has been significant recent activity in offshore wind, with the size and complexity of future projects necessitating international companies forming consortia, a significant number of which we are assisting. There have been a number of delays to the issuing of licences for new offshore wind projects, in particular caused by a change in government. However, fears that some disputes within the coalition government would lead to further postponements and a possible downscaling of offshore wind as a new industry in Norway appear to have been premature, with a proposed timeline currently laid out by the Ministry of Petroleum and Energy seeking a first auction process for offshore wind licences in summer 2023.

A significant increase in energy prices has seen a resurgence in interest in small-scale hydropower (where installed capacity is less than 10MW) – a significant energy provider in Norway – as an investment asset. A large number of international energy and infrastructure investors are investing or seeking to invest into the segment and we have been assisting a number of these. We also foresee more activity within onshore wind in the near future, as we expect that new regulations will be clarified and issued soon.

Money continues to flow into green energy technology companies, which exist at the intersection between technology and renewable energy. As well as technology aimed at replacing fossil fuels with renewable sources, it can also refer to auxiliary technologies that will also be important for a green energy transition, either through mitigation and adaptation. This includes clean battery production, electric vehicle charging infrastructure, industrial energy recycling and hydrogen production and distribution. Such is the level of interest and investment in this area, the Norwegian Competition Authority recently imposed disclosure requirements for any transaction within the electric vehicle charging infrastructure sector.

More ESG measures coming into force

Environmental, social and governance (ESG) issues continue to grow in influence for corporates, regulators and investors in 2022. The effective date of the Norwegian Transparency Act has arrived, with it coming into force from 1 July 2022. The Act imposes significant requirements on approximately 9,000 Norwegian and foreign companies offering goods and services in Norway (foreign enterprises offering goods and services are only subject to the Act, if these are liable to pay taxes pursuant to Norwegian legislation). The Act establishes duties with the aim to promote respect for human rights and decent working conditions and ensure access to information. We believe this increased focus on human rights will be significant in many transaction due diligence processes. It will be increasingly important for the buyer to assess whether the target company has sufficient routines to be able to comply with the Transparency Act.

Another piece of upcoming legislation is the Act on Disclosure of Sustainability Information in the Financial Sector, which will incorporate the EU Taxonomy Regulation’s requirements into Norwegian law. Norway has already adopted the legislation and it is likely to enter into force in autumn 2022. The Taxonomy establishes a classification system for “sustainable economic activities” and sets out a new method for reporting on sustainability performance. Reporting obligations will apply to large public interest entities with more than 500 employees.

National security considerations are becoming more and more important in transactions. The authorities are to a greater extent assessing potential threats to national security interests and may require suspension, blockage or impose measures to mitigate the risk of threats to such interests. The authorities are currently discussing which sectors are particularly important from a national security perspective and may subject additional areas, such as data centres, to regulations.

Increased focus on incentive schemes

Share incentive programs for employees

On 28 March 2022 the Tax Directorate published a statement of principles regarding the tax treatment of share incentive programs for employees where a part of the purchase price for the shares are not settled at the time of acquisition, but at the time of realization of the shares and/or by dividends from the company. The Tax Directorate states that a credit to the employee should be regarded as a loan, and not taxed as employment income at the time of allotment, even though the agreement between the employer and the employee states that the loan under certain conditions can be forgiven. The loan will not be regarded as employment income before and unless the loan is actually forgiven. The Tax Directorate consequently reversed their statement of 1 January 2022 where such loans were regarded as employment income at the time of allotment.

We are experiencing an increased focus on incentive schemes by the tax authorities.

Working group to review the Norwegian tax system

The government has nominated a working group to review the tax system, and its mandate has a particular focus on “unintentional consequences” of the Norwegian exemption model. The group shall present its recommendations in November 2022. There are concerns that limitations in Norway’s exemption model may be introduced. Currently, unlike several other jurisdictions, there are no de-minimis requirements for the model to apply in relation to investments in entities resident within the EEA. Another concern is that rules stating that distributions should follow a sequence for tax purposes could be introduced, e.g. that retained earnings should be deemed distributed before distribution of paid-in capital (which is normally tax free). Finally, there has also been discussions and proposals from politicians to introduce stricter exit tax rules.

Outlook for H2 2022

Despite significant volatility in regional and global markets, we expect to see significant M&A activity in Q3 and Q4 in Norway. Corporates are looking beyond the current climate to focus on long-term strategy and growth, which is supported by access to inexpensive debt, as well as financing and capital. For private equity, the picture remains unchanged in terms of significant dry powder in the Nordics and further afield. In the capital markets, the same pressures affecting M&A activity will apply, but we are still expecting to see a healthy listing pipeline, with a preference for main market Oslo Stock Exchange listings, large carve-out IPOs and transfers on to the main market from Euronext Growth. The second half of 2021, although much calmer than the first half, was more representative of a ‘normal’ year. We are optimistic that the level of deal activity in H2 2022 will be more reflective of H2 2021 rather than H1 2022.

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