M&A Trends: Insights as we enter 2025

Key Trends in the M&A Landscape

In 2024, we observed several significant trends shaping the M&A market:

• Active Corporate Consolidation and Restructuring: Industrial corporations have taken a more proactive approach to consolidations within their business segments. This trend was highlighted by DNB's acquisition of Carnegie, DOF Group's acquisition of Maersk Supply Services, the Tinius Trust's acquisition of Schibsted Media, and Lyse's ongoing acquisitions and restructuring within the telecom sector.
• Increased Activity in the Private Equity Sector: The private equity landscape has shown an increased activity level, with expectations that interest rate cuts will have a greater impact on transactions in 2025. Notable examples include Altor's sale of the Nordic Tyre Business to Axcel, Nordic Capital's acquisition of Sensio, and Accent Equity's purchase of Brimer. We expect that private equity sponsors will continue to pursue add-on investments for their Norwegian portfolios in 2025.
• Aligning Valuations in Public-to-Private Transactions: Recent public-to-private transactions (P2Ps) indicate a growing alignment between valuations on Euronext Oslo Børs and those of potential buyers. This shift was exemplified by Permira's and Blackstone's acquisition of Adevinta, as well as the acquisition of Gram Car Carriers by SAS Shipping Agencies Services Sàrl (a wholly owned subsidiary of MSC Mediterranean Shipping Company SA).

Evolving Transaction Structures

Although the jury is still out, we have noted several trends influencing the transaction structures within the M&A space:

• Continued Use of Earn-Out Models and Vendor Loans: The use of various "earn-out" models remains prevalent, driven by the uncertainty surrounding future earnings in a volatile market. These models effectively bridge the gap between sellers' expectations and buyers' valuations. Furthermore, although the liquidity in the credit market has improved we still note a relatively high level of vendor loans enabling buyers to secure that their acquisitions can be fully financed on appropriate terms.
• Preference for Locked-Box Accounts: The locked-box model continues to be the preferred method when determining the equity values, offering simplicity and providing sellers with certainty about the final purchase price. However, given the uncertainties related to future earnings, we expect this model to be primarily used in transactions with a short interval between signing and closing or steady earnings in said period, unless mitigated by earn-outs or other mechanisms.
• W&I Insurance as the New Standard: Warranty and indemnity (W&I) insurance is increasingly becoming the norm rather than the exception. This trend not only facilitates a clean exit for financial sponsors but also streamlines warranty negotiations, ensures a reliable counterparty for warranty claims, and minimizes potential disputes with reinvesting selling shareholders who are key employees of the acquired company. Our experience is that W&I insurance is particularly common in structured auction processes, where it helps expedite the timeline from final bids to the signing of the SPA.

Looking further into 2025, the M&A landscape is set to continue evolving, shaped by these emerging trends and market insights.