A record breaking year for M&A in the Nordic software and IT services market

2020 was a remarkable year for M&A activity within the Nordic software and IT services sector. The market quickly rebounded from the dip in March caused by Covid-19 and software trading multiples reached an all-time high, with the highest number of deals recorded over the last 5 years. The Nordic IT services market continued to perform strongly in 2020, trading at above average multiples and with sustained high M&A deal pricing and volume.

Acceleration, adoption and disruption: technology and software trends in the wake of the pandemic

Looking at 2020 through the rearview mirror, it has been an unprecedented year in terms of high’s and low’s, with the technology and software sectors in the Nordics driving the highs. The pandemic has accelerated and expanded the digital transition, disrupting the status quo in lagging industries. Companies and individuals were forced to quickly find digital solutions that enabled business to continue, resulting in a step change in IT infrastructure and services demand. SaaS-based vendors who were able to scale rapidly attracted significant interest from all angles, resulting in an increased willingness for investors to pay premiums for future cash flows. We explore a trend that we believe will continue as we adapt to a post-Covid environment, driven by fundamental changes to attitudes towards technology and human interaction: Enter the versatile digital workplace: the future of collaboration and interaction.

A total number of 183 software and 76 IT services deals were announced in the Nordic market in 2020

The Deloitte SaaS index traded at approximately 17x next twelve month revenues as at year end 2020, 2x above the last 5-year average and outperforming the broader market over the last 5 years with a return of 6x. The Nordic software transactions concluded at a median EV/Sales multiple of ~5x in 2020 with a 25% growth in deal volume in Norway and 28% growth in the rest of the Nordics compared to 2019. The fantastic story of Norwegian founded company Spacemaker was a high-profile transaction in 2020, with the American IT giant Autodesk acquiring the company at a valuation of ~EURm 200. Visma continues to execute its M&A strategy across the Nordics and was the most active acquirer within the software segment with 3 acquisitions in Norway, 2 in Denmark and Sweden each, and 1 in Finland.

The Deloitte IT services index traded at approx. 12x next twelve month EBITDA at year end 2020, 1.2x above the last 5-year average and has returned 3x over the last 5 years, slightly outperforming the Nasdaq index. Transaction multiples with available price information in the Nordic IT services market concluded at a median EV/EBITDA multiple of ~9.3x in 2020. The number of IT services transactions in Norway remained fairly stable in 2020 compared to 2019, while the deal volume in the rest of the Nordics experienced a small increase in 2020 compared to 2019. The standout transaction of 2020 within the Nordic IT services space was Triton Partners acquisition of HIQ at an EV of EURm 365. In the Norwegian IT services market, Equip and FSN Capital backed Nordlo were the most active investors in 2020.

A new sector report

This report launches a new Deloitte M&A sector report for software and IT services covering Norway and the Nordics. The 2020 report reflects transactions involving a Nordic target registered in Mergermarket, as well as our transaction experience and insights on key industry trends. This publication will be followed by quarterly updates covering recent transaction data and analysis, and specific industry trends.