Fundraising in Scandinavian Mergers & Acquisitions

The Scandinavian mergers and acquisitions market has experienced a significant structural change from 2021 to 2025. After reaching a post-pandemic peak in deal activity in 2021, driven by ample liquidity, narrow credit spreads, and strong private equity investment, the market then faced a substantial correction due to rising interest rates, increased geopolitical uncertainty, and adjusted valuation expectations. By 2025, signs of recovery are becoming clearer, with deal volumes slowly rising and the financing environment showing renewed strength in both debt and equity markets.

This article explores the fundraising dynamics driving M&A transactions in the four main Scandinavian markets — Denmark, Sweden, Norway, and Finland — with a particular focus on how capital sourcing has evolved structurally, the role of private equity as both buyer and co-investor, the rise of alternative lending as a key financing method, and the implications these trends have for transaction execution in the near future.

MARKET CONTEXT: A CYCLE IN FOUR PHASES

Any meaningful discussion of M&A fundraising in Scandinavia must start with an understanding of the macroeconomic context. The five-year period from 2021 to 2025 can be seen as four mostly different phases: the post-pandemic boom of 2021; the sharp decline of 2022, driven by the war in Ukraine and aggressive monetary tightening; the long process of adjustment in 2023; and the cautious stabilization and partial recovery seen in 2024 and into 2025.

In 2021, Scandinavian M&A experienced its highest activity level in over a decade, with roughly 1,842 transactions completed across the region, supported by a total disclosed deal value exceeding EUR 198 billion. Private equity firms, energized by a surge of dry powder accumulated during the 2020 lockdown and by historically low borrowing costs, accounted for a disproportionate share of the deal volume. Leverage multiples on buyout transactions typically surpassed 6x EBITDA, and sponsor-to-sponsor processes faced intense competition. The Nordic technology, healthcare, and business services sectors were especially beneficiaries of this momentum.

The landscape changed significantly in 2022. As central banks in Sweden, Norway, Denmark, and throughout the eurozone raised interest rates to fight inflation, the cost of borrowing increased sharply. Deal volume dropped to around 1,654 transactions, and total value fell to EUR 171 billion. The leveraged loan market grew more selective, and pricing on new credit facilities widened considerably. Several processes initiated at peak valuations were either paused or significantly repriced.

2023 marked the low point of this cycle, with deal volume falling to about 1,391 transactions — the lowest in the review period — and total value dropping to EUR 135 billion. The widening of the bid-ask spread between vendor expectations and buyer willingness-to-pay defined the year. However, the groundwork for a recovery was quietly being laid: corporate balance-sheet repairs, a growing secondary market for private equity fund interests, and the continued expansion of direct lending as a complement to—and often an alternative to—syndicated bank debt.

By 2024 and into 2025, a more positive environment had reemerged. Central banks shifted toward rate cuts, credit spreads narrowed, and stock markets rallied, allowing a partial reopening of the IPO market in Stockholm and Copenhagen. Estimated deal volumes for 2025 are about 1,560 transactions, with total value near EUR 169 billion — still below the 2021 peak but showing a market that has absorbed the post-pandemic correction and is finding a new balance.

THE FUNDRAISING LANDSCAPE: SOURCES AND STRUCTURES

Private Equity Capital

Private equity has consistently been the largest single source of acquisition financing in the Scandinavian market. In 2021, PE-sourced capital totaled around USD 72 billion of total deal financing, reflecting the aggressive deployment strategies of both pan-European and Nordic-focused funds during that period. The subsequent correction in 2023 reduced PE contributions to approximately USD 42 billion, as fund managers became more cautious in underwriting, exit timelines lengthened, and limited partner appetite for follow-on commitments decreased.

What is particularly noteworthy about the Scandinavian PE ecosystem is the concentration and sophistication of Nordic-headquartered managers. Firms such as EQT, Nordic Capital, Altor, FSN Capital, and Herkules Capital hold considerable influence in the mid-market segment and have demonstrated the ability to raise follow-on funds even during periods of broader market stress. Their well-established relationships with institutional limited partners across Sweden, Denmark, Norway, Finland, and around the world offer some protection from the volatility typical of more internationally exposed fundraising environments. By 2025, PE-sourced capital is expected to rebound to about EUR 60 billion, making it the largest contributor to the overall funding mix.

Debt Financing: Banks and Direct Lenders

Debt has traditionally been the largest component of M&A financing in the Scandinavian market, and this trend has continued through 2021–2025, although there has been a clear shift in the types of lenders providing that debt. In 2021, syndicated bank debt — arranged via the leveraged loan market — was the primary source of funding for larger sponsor-backed deals. Swedish and Danish banks, in particular, have historically been willing to provide significant acquisition financing, and the Nordic leveraged finance market had grown substantially by the 2021 peak.

The rate hike cycle of 2022 and 2023 significantly changed this landscape. As the reference rate in Sweden (the Riksbank policy rate) moved from negative territory to above 4 percent, and as the Norges Bank and Nationalbanken followed similar paths, the total cost of leveraged debt increased sharply. Borrowers and their advisors increasingly turned to direct lenders—asset managers providing unitranche or first-lien loans outside the syndicated market—who could deliver certainty of execution when bank syndication risk was high. By 2023, direct lending accounted for about 35–40 percent of leveraged buyout financing in the Nordic mid-market, up from less than 20 percent in 2019.

The stabilization of interest rates through 2024 and the modest reductions that followed have narrowed — though not eliminated — the price gap between bank debt and direct lending. The total debt portion of Scandinavian M&A financing was about EUR 89 billion in 2021, dropped to EUR 65 billion at the 2023 low, and has since rebounded to an estimated EUR 78 billion for 2025. Despite its relative shrinkage, debt financing remains the main source of M&A capital in the region.

Equity Capital Markets

The role of public equity markets in M&A financing—whether through rights issues, accelerated book builds, or IPO proceeds designated for acquisitions—has varied considerably over the review period. In 2021, strong equity markets, supported by robust retail and institutional investor interest, facilitated many major transactions in which acquirers raised equity capital as part of their funding. Stockholm's Nasdaq First North and Main Market remained notably active in assisting smaller and mid-cap corporate buyers.

The bear market conditions of 2022 and 2023 largely closed this avenue. Equity issuance volumes dropped significantly, and the IPO market—which had provided a major exit route for PE-backed companies and allowed newly listed firms to pursue bolt-on acquisitions—became essentially inactive. In contrast, 2024 saw a cautious reopening, with several landmark listings on the Stockholm Stock Exchange showing renewed investor interest in Nordic equities. ECM-related M&A financing has rebounded to an estimated EUR 22 billion for 2025, although it remains below the 2021 peak.

Vendor Finance and Structured Solutions

Vendor financing — including deferred consideration, vendor loans, and earnout arrangements — has become increasingly important in deal structuring over time. As the bid-ask spread widened in 2022 and 2023, vendors willing to accept deferred or contingent consideration often maintained headline valuations while giving buyers the working capital flexibility needed to bridge financing gaps. This approach has been especially common in the Scandinavian mid-market, where family-owned businesses and founder-led companies frequently prioritize continuity and valuation over immediate liquidity.

The use of earnout structures — where part of the purchase price depends on the future performance of the acquired business — has increased as a tool for resolving valuation disagreements. Although these structures add complexity to post-completion integration and governance arrangements, they have proven effective in enabling deals that might otherwise not have gone through. Vendor finance and other structured solutions totaled about EUR 12 billion in 2021 and have stayed mostly stable in the range of EUR 8–10 billion during the review period.

STRUCTURAL THEMES RESHAPING THE MARKET

The Rise of ESG-Linked Financing

One of the most significant structural changes in Scandinavian M&A financing during the review period has been the inclusion of environmental, social, and governance considerations in the debt financing framework. Sustainability-linked loans — where the borrowing cost depends on the borrower's performance against agreed ESG key performance indicators — have evolved from a niche product to a standard part of acquisition financing in the region. This trend reflects both the evolving regulatory landscape in the Nordic countries and the preferences of the institutional investors that supply capital to Scandinavian banks and alternative lenders.

Notably, major Swedish and Norwegian pension funds are increasingly favoring portfolio companies that demonstrate credible sustainability strategies. This creates a virtuous cycle where PE-backed businesses with strong ESG credentials can access capital more easily and at narrower spreads. For M&A advisors, the ability to structure and market a sustainability-linked financing package has become a significant competitive advantage.

Cross-Border Capital Flows

The internationalization of M&A financing in Scandinavia has continued rapidly during the review period. US-based private credit funds have significantly increased their exposure to Nordic deals, attracted by the quality of assets, the legal predictability of Scandinavian jurisdictions, and the relatively compressed pricing that characterized the market in the pre-tightening era. Simultaneously, pan-European leveraged finance banks have expanded their coverage of the Stockholm, Copenhagen, and Oslo markets, competing aggressively with domestic institutions for mandates on the largest transactions.

This global movement of capital has generally benefited dealmakers by expanding financing options for acquirers and increasing competition in the lending market. However, it has also introduced a level of correlation risk: during periods of broader risk-off sentiment — as experienced in the second half of 2022 — the sudden and substantial withdrawal of international liquidity can compel domestic banks and borrowers to operate under much tighter conditions.

The Secondary Market and GP-Led Transactions

The secondary market for private equity fund interests has become an important source of liquidity and capital recycling in Scandinavia. As the primary fundraising environment became more difficult during 2022 and 2023, many Nordic PE managers turned to the secondary market — either through traditional LP-led secondaries or sponsor-led continuation fund structures — to manage portfolio durations and provide liquidity to their existing investors. This trend created a unique financing dynamic, with secondary investors injecting new capital into seasoned portfolios at discounts to estimated net asset values.

GP-led transactions have increasingly become more common and sophisticated. In these setups, a fund manager moves select assets — usually the top performers in a maturing fund — into a new continuation vehicle, bringing in secondary investors as new limited partners and providing liquidity for existing LPs who choose to cash out. For the assets involved, this process offers an alternative to a traditional sale and often resets the financing structure by adding fresh leverage alongside new equity capital.

OUTLOOK: 2025 AND BEYOND

As the Scandinavian M&A market moves into the second half of 2025, the conditions for continued recovery generally look positive, though significant risks still loom. The easing of monetary policy by the Nordic central banks and the European Central Bank has lowered the overall cost of acquisition debt, enhancing transaction economics for leveraged buyers. Equity markets in Stockholm, Copenhagen, and Helsinki have rebounded significantly from their 2022 lows, creating a more favorable environment for equity-financed acquisitions and for the IPO market, which serves as a key exit route for private equity.

Private equity fundraising in the Nordic region has shown resilience by global standards. Several major Nordic PE managers completed successful fundraises in 2023 and 2024 despite the challenging environment, leveraging their track records of consistent returns and the long-standing relationships they maintain with institutional LPs in the pension and insurance sectors — institutions that are naturally long-term investors with a structural need to deploy capital into private markets. The deployment of this capital over the next 18–24 months is expected to significantly drive M&A activity, especially in the technology, healthcare, and renewable energy sectors that have become central to the Nordic investment thesis.

The financing market is experiencing a period of structural normalization. Direct lending, having shown its resilience throughout the rate cycle, is expected to continue a strong presence in the mid-market even as bank appetite recovers. The pipeline of ESG-linked financing structures is projected to expand, supported by regulatory developments at both the EU and Nordic national levels. Additionally, the secondary market, which grew significantly during the correction period, is likely to remain a key component of the PE financing ecosystem rather than reverting to its pre-2022 niche status.

The main risk to this positive outlook is a resurgence of macroeconomic or geopolitical instability. The Scandinavian economies — small, open, and highly integrated with global trade and financial flows — are naturally vulnerable to external shocks. A sharp decline in the European economic outlook, renewed inflationary pressures, or increased geopolitical tensions in the Nordic region could quickly reverse the recovery. Acquirers, advisers, and lenders should stress-test transaction structures across various scenarios and maintain conservative leverage assumptions, as highlighted during 2022–2023.

CONCLUSION

The Scandinavian M&A market from 2021 to 2025 has gone through a complete cycle: from excitement to contraction, then to recalibration, and finally to tentative recovery. During this period, the fundraising and financing landscape has changed in ways that are likely to last: a bigger role for direct lenders, a growing integration of ESG factors into financing structures, the maturing of the secondary PE market, and a more globally diverse group of capital providers. For those involved in this market—whether as principals, advisors, or financiers—understanding these structural shifts is essential for successful decision-making in the coming years.

The Scandinavian economies' hallmarks of transparency, legal certainty, institutional quality, and governance sophistication continue to attract capital from around the world. The recovery of deal activity through 2024 and 2025 indicates that the region's structural appeal as an M&A market has not been lessened by the turbulence of the post-pandemic correction. The challenge and opportunity for market participants is navigating a financing environment that is more complex and varied than at the start of the review period.