Because of the somewhat shared history after the WWII the Baltics are customarily referred to as part of Central and Eastern Europe. The business ties and investment flows, nevertheless, tell a different story, with Nordic countries having been playing a key role in rebuilding the economies after the independence was regained. Because of these established close links, what happens on the other coast of the Baltic Sea may have a significant impact on the Baltic markets and thus has to be followed closely.

According to the report summarising data gathered by Zephyr and published by BvD (Zephyr is a database of M&A, private equity and venture capital deals, while Bureau van Dijk is a publisher of electronic business and company information), the volume of M&A transactions in the Nordic region in Q1 2015 decreased to 697 from 792 in Q4 2014, while the value increased to EUR 20.6 billion (from EUR 14.5 billion). The decrease compared to the same period last year (1,092 transaction with the total value of EUR 30 billion) is even more pronounced.

In terms of value Sweden has been an undisputed leader, alone accounting for EUR 11.5 billion. Meanwhile, Finland has been leading in deal numbers with 284 transactions recorded.

The overall deal value (and that reported by Sweden even more so) has been heavily affected by a single transaction where a group of financial investors acquired the power grid operations owned by Fortum, a Finnish energy company, in Sweden. This transaction, which was valued at EUR 6.6 billion, along with the AP Moller Holding A/S selling its 17% stake in Danske Bank A/S (EUR 4.0 billion) and the Japanese Canon Inc. acquiring 100% in Axis AB, a Swedish surveillance camera producer (EUR 2.5 billion), were the three transactions above the EUR 1 billion mark.

Because of the large relative impact of the three EUR 1-billion-plus transactions to the overall results reported, “Gas, water and electricity” and “Banks” were the leading sectors by deal value (EUR 6.7 billion and EUR 4.3 billion respectively), followed by “Other services” accounting for EUR 3.8 billion in transaction value. The latter has been leading in terms of deal volume by a wide margin, with 237 reported transactions across the region.

A rather significant portion of the transaction volume and value has been generated by private equity and venture capital investors, which accounted for 102 transactions with the total value of EUR 7.2 billion. Admittedly, again the deal value has been heavily affected by the Fortum transaction, which alone accounted for EUR 6.6 billion. Over the last five quarters the transaction volumes have fluctuated in a fairly narrow band - between 120 in Q1 2014 and 97 in Q3 2014. Meanwhile, when adjusted for the effects of the Fortum transaction, the value of deals has dropped significantly compared to EUR 3.6 billion in Q4 2014, or EUR 3.3 billion in Q1 2014.

The first quarter to some extent sets the tone for the whole year but we will have to wait at least until the Q2 report is out before making any predictions about the trends this year.

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