Good morning Eurohubsters, it’s Nina Lindholm here to close the week with Friday’s Dealflow.
I hope you enjoyed my newsletter last Friday, as you’ll be hearing from me regularly from now on. Today we’ve got a bit of a peek into the future of European M&A. We also have some deals to talk about, two of which have links to Finland, which is always nice to see, considering that’s where I’m originally from.
Great expectations. A new report by a global law firm CMS, titled European M&A Outlook 2023, said dealmakers are bullish “despite challenging market conditions”. Even when faced with geopolitical uncertainties, rising inflation and interest rates, 73 percent of dealmakers expect the level of European M&A activity to increase, up from 53 percent this time last year.
The report reflects the opinions of 330 corporates and private equity firms based in Europe, the Americas and Asia-Pacific. Almost all – 88 percent – of the respondents are considering M&A.
Louise Wallace, head of the CMS corporate/M&A group, said in a note: “2022 has seen M&A largely above or in line with pre-pandemic levels with of a number of large M&A deals, particularly in the industrials, technology, real estate and consumer sectors. Financial sponsors remain very active and corporate executives continue to discuss possible deals, and all are sending clear and strong signals that dealmaking activity is likely to continue at a high level in the coming months.”
The main driver for deal activity on the buy-side, according to the report, is the availability of undervalued targets. On the sell side, distressed situations are expected to boost activity, as cited by 26 percent of the respondents.
But there are obstacles ahead. The main hurdle the report mentioned is the valuation gap between buyers and sellers. An increase in the cost of financing is also causing concern. As many as 87 percent of all respondents expect financing to be tighter compared with 2021.
On a more positive note, the importance of ESG is on the rise. A clear majority, 90 percent, expect scrutiny of ESG issues in deals to rise in the next three years.
“Investments that incorporate ESG metrics can help you invest successfully for the long term,” said Malte Bruhns, co-head of the CMS corporate/M&A group, in a note. “In our view, society is undergoing a paradigm shift towards sustainability, and companies, investors and governments need to prepare for a significant shift of capital.”
Going green. Speaking of ESG, CapMan announced an investment in Finnish moving and logistics services company Niemi Services. Niemi’s fleet of vehicles runs on 100% fossil-free fuel.
The investment will support the Helsinki-based company’s growth and sees two owners of the company, Ilpo and Kai Niemi, sell their shares. Esa and Juha Niemi continue as majority owners of the company.
“As the market leader, the company holds ample opportunities to further expand its business,” said Tuomas Rinne, partner, CapMan Special Situations. “Strengthening of the company’s governance and management together with the investment capacity through our fund will enable accelerating growth and business development going forward.”
CapMan is headquartered in Helsinki and invests across real estate, private equity and infrastructure. It has over €4.8 billion in assets under management.
Strong as steel. My colleague David Wansboro reported on two Mutares related deals yesterday. First up, Mutares announced it has signed an agreement to sell Nordec Group to two Finnish family offices, Harjavalta Oy and Tirinom Oy, for a 7x-10x return on invested capital.
Nordec Group is a supplier of steel frame structures and facades for construction projects in the Nordic countries. The Helsinki-headquartered company generated revenues of approximately €225.5 million in 2021.
“I am firmly convinced that the exit option now chosen represents the optimum for all parties,” said Johannes Laumann, CIO of Mutares. “Harjavalta Oy and Tirinom Oy’s industry expertise and investment focus make them the ideal new owners to further drive the implementation of Nordec’s strategic growth targets.”
Mutares is a private equity company based in Munich.
Full of energy. Moving on to the second Mutares-related piece of news. Pillarstone, a platform set up by the credit arm of KKR, completed the sale of Sirti Energia to Mutares. The deal is an add-on acquisition for Mutares’ portfolio company Exi, a Rome-based provider of information and communication technology.
Sirti Energia, headquartered in Milan, is a construction and maintenance services firm for the energy infrastructure market. The company will be rebranded in the next few months.
“This marks the eighth acquisition in 2022 and our fourth transaction within the energy sector,” said Mutares’ Laumann. “Our expertise in this sector will help these newly acquired companies to benefit from each other and leverage synergies. I am confident that with the support of the Mutares team, Sirti Energia can fully exploit the growth potential triggered by the energy transition.”
That’s all from me today. Craig McGlashan will be back to write to you on Monday, and you’ll hear from me next Friday. I’ll be at the HPE Europe event in London on Thursday, so hopefully I’ll have some insights from there to report on.
If you’re going to the event and would like to meet up, drop me a note at firstname.lastname@example.org
Have a great weekend.