Norway International Update – Q1 2024

1.1 M&A

Although Mergermarket data reveals a noticeable decrease in the number of transactions compared to the same period in 2023, the first quarter of 2024 has ended in cautious optimism in the Norwegian M&A market.

In Q1 2024, only 208 transactions were registered, down from 318 transactions in Q1 2023. This reduction in activity is indicative of the cautious approach being taken by both sellers and buyers in the current market. However, the pipeline of M&A transactions under preparation is increasing. The number of unsold companies are at record levels globally, and our impression is that this also applies for the Norwegian market. Based on this, we anticipate an increase in activity in Q2. Especially if leading international central banks like the Federal Reserve and the European Central Bank ease their rates, which will impact financing conditions positively and could provide the necessary stimulus for investors to become more active, thereby increasing the number of M&A transactions. Still, ongoing transactions are still taking longer to conclude as investors remain cautious amidst the changing economic landscape and high interest rates, and preparations for new M&A transactions are for the same reason generally thorough.

According to Mergermarket, in terms of sector distribution, 18% of the transactions in Q1 with either a Norwegian target or acquirer were within the technology sector, 13% were within the industrial sector, and 10% within the energy sector. This continues the trend we have observed over the last few years, with technology transactions maintaining their dominance, but with a robust presence in the industrial and energy sectors as well.

Despite the reduced number of transactions compared to Q1 2023, our team of M&A lawyers has been actively advising on a variety of deals, including private M&A, private equity, and small, mid and large cap deals. We have particularly noted an uptick in activity in structured sell-side auction processes, which naturally require more time to plan and conclude than bilateral transactions.

Looking at public M&A specifically, the second half of 2023 was highly active with several landmark deals, while the first quarter of 2024 represented a cool-down. This could be seen as a reaction to increased pricing in the secondary market and an overperforming close of 2023 with seven transactions announced across Oslo Børs’ marketplaces during the last two months of the calendar year. Among the notable public offers launched in 2023, the takeover of Kahoot! by Kangaroo BidCo, a consortium led by Goldman Sachs Asset Management, was successfully concluded in January 2024. In the takeover of Adevinta by a consortium led by Permira and Blackstone, where Schibsted is a rolling shareholder, the 90% acceptance threshold was reached with closing expected during the second quarter of 2024, pending regulatory approvals. Looking ahead, the Norwegian public M&A market has positive outlooks but is expected to return to more normalized activity levels compared to 2023.

1.2 IPOs and Capital markets

The Norwegian capital market experienced a quiet Q1 2024 with the IPO window remaining closed on Oslo Børs’ marketplaces. However, the current pipeline indicates a potential shift in Q2 2024, with companies such as Public Property Invest AS, and the acquirer of Petroserv Marine having announced their intention to IPO. The E&P sector is generally strong in Norway, while it has been years since we last saw a real estate IPO.

There is still a steady number of companies moving from the “junior market” Euronext Growth Oslo to the main market on Oslo børs, which is a natural step for many companies.

Despite the slow IPO market, approximately 20 capital raises were carried out by companies listed on Oslo Børs’ marketplaces in Q1 2024, marking a slight decrease from the approximately 25 capital raises recorded in the same quarters in 2023 and 2022. These capital raises were primarily carried out through private placements. In addition, several larger block sales were executed by shareholders in companies listed on Oslo Børs.

The Oslo Børs main index maintained its momentum from 2023 into Q1 2024. Although the growth was not as strong, the index still managed to increase by approximately 1.6% in Q1 2024.

1.3 Regulatory hurdles in transactions

Regulatory hurdles, especially those related to filing requirements, are increasingly coming under the spotlight for dealmakers. In addition to the well-established competition/merger control framework, Foreign Direct Investment (FDI) filing requirements and, more recently, the EU Foreign Subsidies Regulation (FSR) are influencing M&A transactions, including those in Norway. Under the existing Norwegian FDI framework, we experience a heightened focus from the regulator on M&A, a trend that is likely to strengthen. The anticipated new Norwegian FDI law that is currently under discussion is expected to bring significant changes to the filing process and lead to an increase in the number of transactions that will need to be filed. Furthermore, Norwegian cross-border transactions are increasingly affected by new and stricter FDI regulations in other countries, such as the recent FDI law in Sweden.

While the FSR generally applies only to larger transactions, it has started to influence Norwegian deals linked to EU countries, particularly due to the necessity to collect and share information required for assessing the applicability of the regulation. We anticipate this will present a significant challenge for future current and M&A transactions, a prediction apparently confirmed by initial practical experiences from Brussels: a higher number of transactions are being filed than the regulator anticipated, and the impact on deals is considerable.

1.4 Certain Corporate and securities law considerations

 Annual shareholder meeting season
April through June is the season for holding annual shareholders’ meetings in Norway, which is the first season since certain new rules on shareholders’ meetings were implemented for public companies and private companies with shares registered with the Norwegian Central Securities Depository (VPS). These new rules included a record date for participation and new statutory requirements for notification of participation by shareholders holding shares through nominee accounts. Please see a brief overview of the new requirements here.

On January 1, new rules on gender representation in the board of directors of private limited liability companies (of a certain size) entered into force. The requirements are gradually implemented in five phases until 2028, with specific deadlines for companies to be compliant that depends on income and number of employees. The first deadline for compliance is 31 December 2024, which applies to companies that have a total operating and financial income exceeding NOK 100 million. See further details on the new gender representation requirements here.

CSRD
Recent developments regarding the implementation of the Corporate Sustainability Reporting Directive (EU) 2022/2464 (CSRD) into Norwegian law.

The Norwegian Ministry of Finance has recently proposed a phased introduction of the sustainability reporting requirements, as part of the implementation of the Corporate Sustainability Reporting Directive (CSRD) into Norwegian law. The provisions of the CSRD are mostly fully harmonized with certain exceptions within national discretion.

This proposal aligns with the timelines suggested in the preparatory works from the Securities Law Committee.

• Starting from the financial year 2024 (with reporting in 2025), the new requirements will apply to public interest entities. These include banks, insurance companies, and companies listed on a regulated market that have more than 500 employees and also qualify as large undertakings under the 2013/34/EU Accounting Directive.
• From the financial year 2025, these rules will extend to all large undertakings. To be classified as a large undertaking, an entity must fulfill at least two of the following three conditions: sales revenues exceeding MNOK 580, a balance sheet total exceeding MNOK 290, or an average of more than 250 full-time equivalent employees.
• From the financial year 2026, they will also apply to small and medium-sized undertakings listed on a regulated market. These undertakings can choose not to include sustainability reporting in their annual report up until the end of the financial year on 31 December 2027, or earlier. In such cases, the undertaking must include a brief statement in the annual report explaining why the sustainability reporting was not provided.

The Ministry has also proposed to allow an audit firm other than the statutory auditor to certify the sustainability reporting. While no rules are currently proposed to allow independent assurance service providers (IASPs) to certify the sustainability information, the Ministry has proposed to open up for future regulations to permit such certification from independent providers of assurance services.

2.1 ESG

EU reaches an agreement on the Corporate Sustainability Due Diligence Directive (CSDDD)
On December 14, 2023, the Council and the EU Parliament reached a provisional deal on the CSDDD or CS3D, which aims to enhance the protection of the environment and human rights in the EU and globally. Following extensive negotiations and several delays in the beginning of the year, a revised directive proposal was officially approved by COREPER (the Council’s main preparatory body) on March 15, 2024, and shortly after by the European Parliament’s Committee on Legal Affairs (JURI). Should the EU Parliament give its approval to the CSDDD at the end of April, the EU Member States will have two years to implement the law into national legislation.

Several changes were necessary to reach an agreement on the text. Among these, the thresholds have been significantly increased compared to the initial proposal. According to the new text, the CSDDD only applies to EU companies that have more than 1,000 employees (previously 500) and a net worldwide turnover above 430 EURM (previously 150 EURM). The CSDDD no longer specifies lower thresholds for companies in certain high–risk sectors.

This means that around 30% fewer companies will fall within the scope of the directive, implying that only 0.05% of companies in the EU will be affected.

Implementation of CSRD
The Corporate Sustainability Reporting Directive (CSRD) entered into force in the EU on 5 February 2023, obliging large companies and companies listed on regulated markets (except micro-enterprises) to report on their climate and environmental impact. EU member states have until July 6, 2024, to implement the CSRD into their national legislation.

In mid-March 2024, the Norwegian Ministry of Finance proposed changes, in Prop. 57 L (2023-2024), to the Norwegian Accounting Act and several other laws for the implementation of the CSRD into Norwegian law. The proposed content of the sustainability reporting closely aligns with the provisions of the directive and the recommendations of the Securities Law Committee.

The CSRD has not yet been incorporated into the EEA Agreement, but this is expected to occur during 2024. The Ministry of Finance has previously indicated that Norway aims to follow the timeline of the EU member states, with implementation expected during the first half of 2024. The legislative proposal is currently under consideration by the Finance Committee.

Consultation on a new act regarding sustainable products and value chains
On 30 June 2023, the Norwegian Ministry of Climate and Environment published a consultation on a new act on sustainable products and value chains, with a deadline of October 1, 2023.

On March 22, 2024, the Ministry presented the proposal for the Act to the Parliament in Prop. 69 LS (2023-2024). The proposed legislation aims to provide a legal basis for a new and enhanced framework for sustainable products being developed in the EU, in line with the 2020 action plan for a circular economy under the EU’s green growth strategy, “European Green Deal”. The proposal will supplement existing Norwegian environmental legislation, such as the Pollution Control Act and the Product Control Act.

Companies must prepare for high standards of production and consumption in the internal market becoming the new norm.

EU Parliament’s approval of the Green Claims Directive
In order to protect consumers from greenwashing, the EU is currently in the legislation process of the so-called Green Claims Directive. On March 12, the EU Parliament voted to adopt the proposed directive with a significant majority – 467 votes in favor of the legislation, 65 against and 74 abstentions. As per the EU Parliament’s press release, the file will now have to be followed up by the new Parliament after the European elections that will take place in from 6 – 9 June 2024.

2.2 Sanctions

Norway has implemented a new series of sanctions against Russia, which enacts the EU’s 12^th and 13^th sanctions packages into Norwegian law.

The EU adopted its 12th sanction package on December 18, 2023, followed by the 13th package on February 23, 2024. These sanctions were implemented in Norway and came into effect on March 19, 2024.

The new sanctions against Russia introduce several amendments to the Ukraine Regulations (FOR-2014-08-15-1076), aimed at combating circumvention and closing loopholes, as well as imposing additional import and export bans on Russia.

2.3 Security

New legislation of cybersecurity
The Norwegian Parliament enacted a new Digital Security Act on December 12, 2023, aimed at ensuring basic requirements for digital security in companies of particular importance to society. This Act implements the NIS Directive (Directive (EU) 2016/1148 of the European Parliament and Council of July 6, 2016), concerning measures for a high common level of security in network and information systems across the Union (NIS1). NIS2 aims to tackle the shortcomings of the current NIS1 regime.

However, the EU has now decided that member states must transpose the NIS2 Directive into national law within the deadline of 17 October 2024, which would repeal and replace the existing NIS1. The proposed expansion of NIS2’s scope would effectively require more entities and sectors to implement measures. This is expected to contribute to an increase in the level of cybersecurity in Europe over the long term

Should NIS2 become part of the EEA Agreement, it will require legislative amendments, necessitating parliamentary consideration in the Norwegian Parliament (nw: Stortinget). There are strong indications that the directive will be incorporated into Norwegian law, and preparations are underway for a consultation paper outlining proposals for its implementation.

Enhanced focus and possible new regulations on foreign investments in Norwegian companies
As mentioned in our Q4 2023 update, an Official Norwegian Report (NOU) was presented on December 4, 2023, outlining how Norway better can assess, and possibly intervene, in investments due to national security concerns. The external committee proposes that a new act on foreign investment control should be established, with the aim of controlling foreign investments in companies that are not subject to the Norwegian Security Act and to align the Norwegian regulations more closely with the EU.

The deadline for responses was March 15, 2024, and the overview shows that 14 stakeholders submitted their responses. We are now awaiting the government’s position.

The Norwegian rules and practice on ownership of qualifying holdings in the financial sector are being reviewed by the MoF. The maximum ownership or voting rights that an owner can have in entities within the financial sector, such as banks and insurance companies, and the factors considered by Norwegian authorities when assessing an owner’s suitability for subsequent acquisitions, have been a point of discussion for an extensive period. The EFTA Surveillance Authority (“ESA”) has issued three statements concluding that the Norwegian rules and practice are not in accordance with the relevant EEA law. The MoF has in the correspondence with the ESA maintained that the Norwegian rules and practice are in accordance with EEA law. In January 2024, the MoF presented for consultation a proposal with amendments to the rules on acquisitions and increases of qualifying holdings in the financial sector. In parallel, the MoF has also tasked the NFSA with assessing the rules on ownership of qualifying holdings in the financial sector, with a deadline at the end of the year.

The proposal for a new PRIIPs act which implements the PRIIPs regulation (Regulation (EU) no. 1286/2014) into Norwegian law aims to increase investor protection by increasing the transparency, comparability and accessibility of costs, risks and expected returns on investments. The legislative proposal from the MoF is currently under consideration by the Norwegian Parliament (Stortinget).

The MoF has presented for consultation a proposal for a new act on crypto assets with supplemental regulations to implement MiCA (Regulation (EU) 2023/1114) and TFR II (Regulation (EU) 2023/1113) into Norwegian law. In addition to the new act, the NFSA proposes amendments to the AML Act to include MiCA service providers and the Financial Institutions Regulation to specify that e-money tokens are covered by the definition of e-money. The proposal does not propose to include a simplified application alternative for firms who are already authorized by the NFSA to provide exchange or custody of crypto assets. The deadline for the consultation is set to 1 June 2024.

The proposal for a new act on digital operational resilience implements DORA (Regulation (EU) 2022/2554) into Norwegian law. DORA aims to strengthen the ICT security of financial entities to ensure the resilience of the financial sector. The deadline for the consultation was 3 April 2024.

5.1  Tightening of the exit tax rules

The Ministry of Finance’s proposal implies that the exit tax must be paid within 12 years, for unrealized gains and losses exceeding NOK 500,000 when the taxpayer establishes tax residency outside Norway. Exit tax also applies on gifts and other transfers of shares and assets to related parties who are not Norwegian tax residents, and the proposal suggests that the threshold for exit tax in these cases should be reduced to NOK 100,000.

In order to prevent any adjustments prior to the new rules being entered into law, the suggested changes will apply to relocations and transfers occurring from March 20, 2024, and onwards.

According to the proposal, the taxpayer is given three alternative ways to pay the exit tax, which includes:

• paying the tax immediately,
• paying the tax in interest-free installments over 12 years, or
• paying the tax at the end of the 12-year deadline with added interest.

The option that allows for a postponement of the exit tax is revoked upon actual realization of the shares and assets, or if the taxpayer dies when residing abroad. In such events, the exit tax must be paid in full.

The Ministry of Finance proposes to maintain the rule of annulment of the exit tax if taxpayer liable for exit tax moves back to Norway with the shares intact within the expiry of the 12-year period. This also applies where the taxpayer already has paid exit tax but relocates back to Norway.

Further, it is proposed that the taxable gain and loss should not be affected by various events after relocation. This means that the tax base for calculating the exit tax is the shares market value on the day before emigration. Further, the Ministry of Finance also proposes to repeal the provisions that grant the right to credit deductions in cases where the taxpayer realizes the shares after the relocation. This means that the taxpayer cannot claim deductions for tax on the gains paid to another state in the tax base to Norway for the realization of shares and assets.

The Ministry of Finance also proposes to expand the scope of the exit tax. The proposal implies that assets in share shavings account (Nw. aksjesparekonto) and in certain capital insurance schemes (Nw: fondskonto, kapitalforsikring) also shall be subject to exit tax.

5.2 Implementation of pillar 2

A new act on top-up tax, implementing parts of the OECD’s Pillar 2 model rules, became effective on January 1, 2024. The new “Top-up Tax Act” (Nw. suppleringsskatteloven) ensures a minimum tax rate of 15 % in multinational group companies, regardless of where the group company operates. The taxation is carried out by calculating a supplementary tax based on the difference between an effective tax rate of 15 percent and the actual effective taxation of the group in each jurisdiction where the group operates.

The Top-up Tax Act applies to Norwegian and multinational companies and permanent establishments with an annual total income of at least 750 million euros for two of the four preceding fiscal years. The top parent company’s consolidated accounts form the basis for this assessment.

Multinational groups covered by the rules must prepare and submit a separate information return (Globe Information Return) to the tax authorities in their jurisdiction. The information return must be prepared in English and must contain information on, among other things, group structure, calculation and distribution of supplementary tax, choices made, and other key information.

In addition, group units that become taxable to Norway under the Top-up Tax Act must submit a separate tax return for top-up tax. However, group units that fall within the scope of the Top-up tax but are not obligated to pay Top-Up tax in Norway, are not required to submit a tax return for supplementary tax.

On August 19, 2023, Amer Sports Norge AS, Amer Sports Holding GmbH, Salomon S.A.S., and Atomic Austria GmbH (collectively referred to as Amer) filed a lawsuit seeking a declaratory judgment that Amer’s ski binding systems Shift (2023) and Shift Race do not infringe on Rottefella AS’ (Rottefella) ski binding patents. Rottefella has counterclaimed for infringement, prohibition, and recall of the relevant ski bindings, as well as a claim for financial compensation. During the case preparation, Rottefella filed several requests to Amer for information relevant for their counterclaim. Amer disputed several of the requests.

The district court ordered on January 11, 2024 Amer to  provide much of the requested information, e.g. more comprehensive documentation related to the binding systems, including their development, production, and mounting process.

However, the court did not grant Rottefella’s request for an inspection at the factories where the ski bindings are produced (in Austria). The reason for this was twofold. Firstly the court referred to the Dispute Act paragraph 26-5, which provides a basis for refusing access to evidence if this would entail costs that are not proportionate to the dispute and the possible value of the evidence.  Secondly, the court referred to the Dispute Act paragraph 22-10, which limits the right to require access to evidence that cannot be made available without revealing a trade secret. This provision was also the basis for denying access to certain information on Amer’s sales and marketing activities.

This ruling emphasizes the court’s role in striking a balance between the need for information disclosure and the protection of trade secrets.

7.1  New Managing Partner

On 1 January 2024, Stephan L. Jervell assumed the role as new managing partner at Wiersholm, succeeding Morten Goller, who has led the company for six years.

Stephan L. Jervell, one of Norway’s leading litigation lawyers with a particular emphasis on international arbitration, has had a long-standing tenure in the firm and has held numerous leadership roles, including that of chairman of the board at Wiersholm.

Jervell has now taken on the challenge of leading Wiersholm into the future and continuing the growth the firm has seen in recent years.

Read more here.

7.2  Strengthening our foothold in Trondheim

We continue to strengthen our position and competitiveness in the Trondheim region and have admitted six new Trondheim-based partners. The change is intended to establish Wiersholm as the leading legal player in Central Norway.

The six lawyers who have been admitted to the firm’s partnership are Terje Bjørndahl, Eirik Edvardsen, Frode Henning Antonsen, Morten Brandhaug, Martin Fevaag Larsen, and Bård Solem – all previously partners at SANDS Trondheim.

The Trondheim office will focus on the practice areas aquaculture, technology, renewable energy, real estate, tax and M&A.

The new partners will join Wiersholm during 2024. By the end of the year, it is our aim that our Trondheim office has up to 40 employees. At the same time, we have the ambition that Wiersholm becomes the most attractive, largest, and most competent workplace by far for lawyers in Central Norway.

Read more here.

7.3 International rankings and acknowledgement

Reflecting upon the first quarter of 2024, we are humble to acknowledge that Wiersholm has maintained robust performance in internationally recognized rankings. It shows the weight and breadth of what we do. We have always placed great emphasis on professional strength and development at Wiersholm, and we are pleased that this is also reflected in the rankings.

A few notable achievements: 

• In the most recent Global ranking from Chambers and Partners, Wiersholm was honored with several top rankings as a firm. Furthermore, 20 of our esteemed lawyers achieved individual rankings, making Wiersholm the law firm in Norway with the highest number of individual rankings.
• In the 2024 edition of Chambers Europe, our firm’s lawyers were recognized with 50 individual rankings, marking the highest number of individual recognitions we have ever achieved. Particularly in the realms of Shipping and Real Estate, we were fortunate to experience a modest elevation in our position compared to the previous year.
• Wiersholm has been ranked in all 20 practice areas in the 2024 edition of Legal 500, with top rankings in 16 areas. Beyond the firm-level accolades, we are gratified to see that a total of 65 of our lawyers have been recognized in the individual rankings.
• Lastly, we are humble to announce that Wiersholm was awarded “Norway Firm of the Year” in the Chambers Europe Awards 2024.

7.4 Save the date – upcoming events

Trends in Dispute Resolution Forum 2024
Wiersholm aims to be a driving force within effective dispute resolution. We have for some time wanted to host an annual forum to facilitate discussions and sharing of views across borders and disciplines. Now we are finally doing it – on 13 June 2024 we kick off the first Wiersholm Trends in Dispute Resolution Forum.

What to expect:

• Keynote Speaker professor Richard Susskind – author of “Tomorrows Lawyer” – offers his thoughts about where we are and the likely future for lawyers and judges.
• Tech journalist/author Per Kristian Bjørkeng gives a talk on “Everything You Always Wanted to Know About AI But Were Afraid to Ask”.
• Panel discussion with presentations from distinguished European law firms on their current use of AI and LLMs in daily dispute resolution work- Updates from relevant service providers.

Full agenda and details will follow, but you may already reserve your seat. If you would like to register for this conference, please send an inquiry to marketing consultant Lotte Midttun Bakken – loba@wiersholm.no.

Nordic Buy Out Forum 2024

On December 5, 2024, Wiersholm is hosting the 14^th edition of the Nordic Buy Out Forum – the largest and most important conference for M&A practitioners in the Nordics.

Last year we had a record number of participants and a great line-up of speakers who deep dived into the four main topics M&A trends and outlook, AI, Private Equity and Challenges in Value Creation Strategy Execution, and Grow the pie – focusing on investments driving both purpose and profit.

Full agenda and details for the 2024 Forum, but you may already register here.

We hope to see you in Oslo in December.