Transaction market conditions
The Nordic stock market has rallied since the middle of 2012, driven by reduced political uncertainty in the US, stronger growth in China, rising leading indicators in Europe and flows from bonds to equities.The US has come furthest in clearing out the housing bubble and the household debt overhang, and has the potential to take the role as a global growth driver during the coming years. Chinese economic signals have improved broadly since the summer last year, for example the country has boosted infrastructure investments again, after the slowdown in 2012.
In Europe, equities typically rise in absolute terms when the important German Ifo indicator turns, which has also been the case during the winter and spring of 2013. Although the indicator has fallen slightly in recent months, the stock markets continued to rise throughout Europe until very recently, when equities around the globe took a sharp downturn. As of mid-May this year, the OMX Stockholm index was up ~11% during the year, a rise almost completely wiped out as of the end of June. The main reason has since the beginning of June been the uncertainty before the Federal Reserve meeting on June 19, and afterwards the news from the same meeting that the Fed for the first time had set out a framework for ending its third round of quantitative easing. In addition to uncertainty in the US, the Chinese credit market took a severe hit in mid-June, leading to increased market volatility throughout the globe.
In the Nordic region, the equity capital markets saw an extremely eventful last quarter of 2012 with 74 transactions, compared to 34 in Q3 or 53 in Q4 2011. This led to a more quiet first quarter in 2013, however the number of transactions was still in line with last year, potentially driven by rising share prices and valuation. Rising share prices, high capital inflows to equity funds and low volatility in the stock market are all signs of a good IPO market, and although we have seen a few smaller IPOs, we are still waiting for the first large IPO in the Nordics for a couple of years.
The total number of M&A transactions and the total M&A transaction volume in the Nordic region during Q1 2013 decreased by 26% and 31% respectively compared to the same period last year. The activity has thus disappointed so far in 2013, but is expected to increase as there are many good reasons for high M&A activity, including increased prices, better economic activity, access to cheap financing and strong balance sheets in the corporate sector.