The Nordic economies have exhibited a year of divergence and surprising resilience. Denmark stood out as the dynamo, with GDP growth projected to exceed expectations and reach 2.4 percent this year, according to the European Commission. Growth was driven by industrial production, particularly in the pharmaceuticals and North Sea energy extraction sectors. GDP growth is forecast to expand to 2.5 percent in 2025, says the EC, while public finances remain strong, with public debt projected to reach 28.3 percent of GDP.
Iceland's economy, however, has cooled, with GDP growth estimated at a modest 0.6 percent. This slowdown follows a period of robust expansion and reflects the impact of global uncertainties on tourism and exports. Inflation remains a concern at 5.4 percent, but the Central Bank of Iceland decreased interest rates for the first time since 2020, by 0.25 percentage points, to 9 percent. Despite these challenges, Iceland's strong fiscal position and resilient labor market provide grounds for cautious optimism.
Norway's economy has remained steady, anchored by high energy prices and robust exports of its vast oil and gas reserves. Its real GDP annual growth is set for 1.5 percent in 2024, and inflation is at 3.3 percent. The government's decision to increase taxes on the oil and gas sector has initiated an electric vehicle sales boom, which is an outlier trend compared to the global downturn in EV sales. Unemployment has improved slightly, down to 4.1 percent in the second half of 2024, from 4.4 percent in January.
Sweden faced a more challenging year, with GDP growth estimated at 0.5 percent in 2024. However, the future looks brighter, with growth driven by rising household consumption expected to reach 2.2 per cent in 2025 and 3.1 percent in 2026. The Swedish Riksbank cut interest rates by 50 basis points in November, and commercial banks are expecting a further series of cuts to reach a policy rate of 2 percent starting in March next year. Until recently, high household debt, coupled with rising interest rates, had dampened consumer spending. The manufacturing sector also experienced a slowdown, reflecting weak global demand. Despite these challenges, Sweden attracted the lion’s share of M&A activity in the Nordics, thanks to its strong innovation ecosystem and skilled workforce.
Finland's economy contracted by 0.2 percent in 2024, marking a technical recession. This downturn was primarily attributed to weak export performance, particularly in the forestry and technology sectors. However, the economy is expected to gradually pick up, with GDP slated to grow by 1.5 percent in 2025 and 1.6 percent in 2026, according to the EC. The ongoing geopolitical tensions with neighboring Russia have had limited impact on Finland’s economy, though the country and other Nordic nations have begun to issue advice on civilian defense in case of a broader conflict.
Deal activity set to rise
This continued economic resilience has proved to be a solid foundation for dealmaking. Despite a dip from the heightened activity of 2021 and 2022, the Nordics witnessed a notable rebound in M&A throughout 2024. This resurgence aligns with a broader global trend of increased dealmaking for company and sponsor-backed activity.
Data for the first three quarters of 2024 reveals a slight decrease in deal volume but a notable increase in deal value. Across Denmark, Finland, Norway and Sweden a total of 1,709 deals were recorded, representing a modest decrease from the 1,744 deals during the same period in 2023. However, the aggregate value of these deals surged to US$57.5 billion, marking a substantial rise from the US$46.5 billion recorded in the same period last year.
Sweden led in terms of deal volume for the first three quarters, followed by Norway, Denmark and Finland. This activity underscores the region's robust economic fundamentals and attractiveness for both domestic and international investors.
Several factors are feeding a renewed vigor in Nordic M&A. An improved economic outlook means local and global companies have greater confidence in leveraging dealmaking in the Nordics to enhance their competitive advantage, expand into new markets and acquire innovative technologies.
More favorable financing conditions and consolidation plays are expected to support M&A activity in the region. This is also true for private equity funds that remain active in the Nordic market. For the first three quarters of 2024, five of the top 20 deals were backed by sponsors, and more PE-backed targets are likely to come to market in late 2024 and into 2025. Around 140 PE portfolios in the Nordic region are ripe for exit, with some held for up to six years.
Several scenarios could develop. Secondary buyout activity could heat up given the maturity of assets in portfolios, but also strategic deals from companies looking to expand their trade footprint in Europe in response to the anticipated “America First” foreign trade policies of the incoming US administration. Alternatively, we could see Nordic companies looking to expand their footprint in the US market through M&A or by setting up US operations to avoid import taxes and generate more jobs, the latter of which could induce tax credits or incentives, depending on the state.
Deal diversity
Nordic deal activity in 2024 has proven sector-agnostic, making it attractive to M&A strategics and private market funds with diverse remits. While top deals in volume have come from the technology, media and telecommunications (TMT) sector, other industries such as manufacturing, life sciences, and oil and gas have experienced healthy deal flow. In terms of the top 20 deals, eight were in Sweden, seven in Denmark, three in Norway and two in Finland.
The largest deal to date has also proven the most complex. Still pending regulatory approval, Novo Nordisk’s US$11 billion strategic acquisition from Novo Holdings of three fill-finish manufacturing sites—in Italy, Belgium and the US, where more than 3,000 people are employed—is part of a larger deal in which Novo Holdings will acquire Catalent, a listed contract development and manufacturing business.
Other notable deals include Danish freight forwarder DSV’s acquisition of DB Schenker, the logistics arm of German state rail operator Deutsche Bahn, for US$15.7 billion. DSV raised US$5.5 billion in a share issue to partially finance the acquisition, a deal that would make it reportedly the world's biggest logistics company.
France’s lottery operator Française des Jeux’s US$2.6 billion acquisition of Stockholm-listed gambling business Kindred Group will diversify its revenue streams and strengthen its competitive position in the rapidly evolving Nordic TMT landscape.
Finnish insurer Sampo's play for Topdanmark was an example of consolidation within the Nordic insurance market. Meanwhile, sugar giant Tate & Lyle's US$1.8 billion purchase of US specialty ingredients company CP Kelco, which included operations in Denmark, was part of a more traditional bolt-on strategy.
PE funds were also active, including UAE-based Magellan Capital, which acquired a majority stake in shipping finance business Danmarks Skibskredit A/S.
Other PE deals included EQT’s US$1.5 billion acquisition of Swedish wind power provider OX2; KKR’s acquisition of Finnish software provider Accountor from Vitruvian Partners; Corten Capital’s acquisition of supply chain software company Roima Intelligence from Intera Partners; and Summa Equity’s acquisition of Finnish utility Fortum’s recycling and waste business for €800 million.
Defensive moves
Market analysts are also eyeing defense tech deals. While this is considered a politically sensitive, niche sector, there could be a rise in number as Nordic countries aim to protect their borders. For example, Norway is considering building a fence along its 123-mile (198-kilometer) border with Russia, while Finland is erecting barriers at some crossing points along its border with Russia. Military-grade drone and sensor technology will be required for such projects.
While few defense deals have materialized so far, those that have include Bridgepoint Development Capital IV fund’s acquisition of Danish anti-drone systems producer MyDefence, for an undisclosed sum. Other indicators include Finland and Sweden’s recent NATO memberships, which could enhance deal flow.
Outlook
Overall, the Nordic economies have demonstrated resilience in the face of global headwinds such as higher interest rates and geopolitical ructions in 2024. While some countries outperformed others, the region's overall commitment to innovation, strong institutions and sound macroeconomic policies provide a solid foundation for future economic growth and deal activity.
However, challenges such as high household debt, geopolitical tensions and higher export costs tied to US trade could warrant closer attention.