Market Review Q1 2020

European and Danish M&A markets start showing the effects of the current COVID-19 pandemic

Resumé

After nearly ten years of growth, the Danish and European M&A activity has been declining in Q1 2020 compared to previous years due to the COVID-19 pandemic spreading throughout most of the world.

In Denmark, the first quarter of the year shows a relatively large number of Danish business sales with interest from abroad, which is on par with previous years. Meanwhile, Q1 2020 shows that Danish companies' appetite for international acquisitions remain at a high level, yet not as high as we saw it in 2018 and 2019. The overall Danish activity level remains healthy, but is beginning to show the impact of the pending COVID-19 pandemic, which is more pronounced when looking at the second half of Q1 2020. COVID-19 has led many financial buyers to focus on the existing portfolio rather than new acquisitions, and at the same time the financing opportunities have become more challenging, which explains that strategic buyers of Danish companies account for 80% of acquisitions; 10% higher than the average for the last five years.

Looking at the European M&A market as a whole, the level of activity in Q1 has also begun to reflect the impact of the current COVID-19 pandemic after a historically strong Q4 2019.

Coming from a record high activity level in recent years, in Q1 2020 we start to see the affects of COVID-19 on the number of transactions completed. At the same time, we see a tendency for strategic buyers to be behind an increasing share of transactions. It is still too early to assess the full impact of COVID-19 on the M&A market, but as potential buyers become more cautious and strategic players account for a larger portion of acquisitions, it becomes even more important for sellers to secure proper advice and to be exposed to a global buyer field. DANIEL SAND – MANAGING PARTNER, OAKLINS DENMARK