Nordic Deals Down as Advisers Grapple with Collapse in TMT

Financial News, October 29, 2001 | Go to article overview

Nordic Deals Down as Advisers Grapple with Collapse in TMT


When the technology, media and telecoms sector was hot, the tech-oriented Nordic region was riding high. But since its collapse, all markets have suffered in Scandinavia.

Mergers and acquisitions activity dropped 37% in the Nordic region in the first nine months of 2001 by deal numbers, and total deal value fell 52%. Making matters worse, many of the top 10 financial advisers lost out on success fees as two of the year's largest financial institutions' M&A deals collapsed.

The optimistic among the advisers try to present the decline in M&A activity as a perfect opportunity to spend more time talking to potential clients. Nonetheless, the events of September 11, coupled with the worsening fortunes of TMT companies, mean that all in all the third quarter has been pretty miserable for Nordic advisers, and there has been an ensuing reshuffle in the league tables.

Jan Olsson, co-head of Nordic investment banking at Deutsche Bank, says: "Some of the shares have been hit enormously here because of the technology content of many companies. Some internet companies' values fell by 90% or even 99% in some cases. So there has been a shock effect. It has had a bigger impact in the Nordic region than in some other countries as some of the cities were very technology-oriented."

Even in cases where TMT companies are very well established and only looking to make selective acquisitions and disposals, like Ericsson has done, M&A is much more restrained.

Knut Ramel, head of Nordic investment banking at Merrill Lynch, says: "Ericsson has acquired using the 'string of pearls' strategy, looking through its portfolio and seeing what is core to its expertise, and that has also led to divestments. That sort of activity is likely to continue. However, the market has been hit by the downturn as the potential buyers have been severely weakened and, therefore, it is difficult for sellers to get sensible prices when attempting to divest."

In addition, advisers have had to grapple with the cancellation of two of the region's biggest financial institutions deals of the year.

First, SEB and ForeningsSparbanken, both Swedish, cancelled their merger in mid-September. They blamed overly restrictive criteria laid out by the European Competition Commission for ruining the deal, and said that there would be too few synergies left to make the transaction worthwhile after all requirements had been satisfied.

Then, two weeks later, Sampo of Finland cancelled its offer for Storebrand, the Norwegian financial services group. Sampo said the financial markets turmoil had made the acquisition too expensive and, therefore, untenable. The fact that Norwegian rival Den Norske Bank had opposed Storebrand going into foreign ownership, and subsequently bought a 10% in Storebrand to block the bid, made matters worse.

Per Starrsjo, a director within Credit Suisse First Boston's Nordic investment banking group, says: "The collapse of the SEB deal may put the brakes on consolidation as it is difficult to predict what the competition authorities' judgment will be, and you cannot get any view on it beforehand."

While most bankers do not believe that Nordic FIG consolidation is completely over, many believe that it will now be more difficult, and some predict that the only large deals possible in the sector will have to be cross-border ones. …

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