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The "tiger economy of Europe", in the words of one partner, has had a resilient banking sector. Much of this is due to Sweden having had its major banking crisis in the early nineties....

The "tiger economy of Europe", in the words of one partner, has had a resilient banking sector. Much of this is due to Sweden having had its major banking crisis in the early nineties. None of the major banks active in the market - Nordea, Handelsbanken, SEB, Swedbank, DnB NOR Bank - needed government support and some of the Swedish banks even refused the state guarantee schemes.

The notable change was that international banks such as RBS and Citibank have diminished their presence in the market. "Until November 2010 foreign banks were not very interested but now they are back... but they haven't seemed very aggressive," says one partner.

Local investment bank HQ Bank folded, mainly as a result of derivatives valuations says one partner, and was subsequently merged into Carnegie Investment Bank after the FSA had withdrawn HQ Bank's license to keep trading. "Carnegie is now looking good, though some people still argue there is stuff in the walls," says a partner.

SEB and Swedbank both incurred losses due to their investments in the Baltics. One partner says: "Our financial crisis was 1991-92, after that the banking system was restructured. Banks had done things they promised never to do again, so they went to the Baltics and did it again." Another says: "It was a ticking bomb for these banks and rumour was that they were balancing on the edge for a while."

All in all, firms have been busy on refinancings and restructurings. "A fair chunk of the work has been refinancing, in 2005 many loans were given with five year maturities," explains a partner.

"Over the last year the transactions market picked up again, with corporate deals, private equity, real estate is even coming back and there is a backlog in restructurings" says a lawyer. "Scandinavian banks have a good appetite, they are more active but the leverage is much more sensible, not like the crazy years of 2006/7," the partner adds. Firms note that 2011 has seen a "shift from refinancing to new financing in auctions, but the first quarter was slower than expected and took longer to get started".

One partner assesses the year as "busier than the market in general". On the projects side, Sweden has a small public-private partnerships (PPP) market, but 2010/2011 did the see the second major PPP come through for the construction of the Nya Karolinska Solna University Hospital.

The capital markets in Sweden are very much dominated by equity capital markets deals and driven by public offers.Last year firms predominantly handled rights issues and capital raisings while the Nasdaq OMX Stockholm saw little activity in terms of IPOs....

The capital markets in Sweden are very much dominated by equity capital markets deals and driven by public offers.

Last year firms predominantly handled rights issues and capital raisings while the Nasdaq OMX Stockholm saw little activity in terms of IPOs. One of the very few completed listings in Sweden was that of the Byggmax Group, which worked with joint bookrunners Carnergie Investment Bank and ABG Sundal Collier, but other than this "the IPO market has not been that good compared to some markets like Norway and Denmark," says one partner.

The largest rights issues were completed by Hexagon, for its $2.13 billion acquisition of the US geo-technology company Intergraph Corporation, and by Nordic company Eniro. Firms also saw a number of large capital raisings and share repurchase agreements.

The debt capital markets are traditionally small in Sweden but have received a boost subsequent to the downturn. "The crisis meant it was hard to get long term loans so bonds suddenly became attractive, but traditionally there has been no need, you can just go across the square and borrow it from the banks," says a local partner. "Companies now see that it is good to have a proportion of debt in bonds, though it will be interesting from a restructuring point of view, in the next restructuring," says the partner.

"We were waiting for the bond market to grow, it was non-existent in Sweden but now we have a domestic bond market," says another partner. The reason for the lack of a bond market, says one partner, is that "we have the Krona, a small currency, therefore it will never get the investors to create a big debt market, bonds have been picking up but from a very low level".

In this sudden development of the bond market there have been quite a few first time products. The market saw the first ever high-yield issuance, securitisations are growing in number and there has been the introduction of CoCo (contingent convertible) bonds, a new method for banks to raise capital. There has also been a lot of debt financing achieved with a combination of bank lending and bonds. This hybrid form of raising debt was used by private equity firm EQT in its acquisition of Dometic Group.

"Everyone in 2010 thought that 2011 would be the year it picked up," says a partner, "but it wasn't the case. 2011 started out much slower than expected considering the headlines of 'Swedish economy booming' but M&A was not affected....

"Everyone in 2010 thought that 2011 would be the year it picked up," says a partner, "but it wasn't the case. 2011 started out much slower than expected considering the headlines of 'Swedish economy booming' but M&A was not affected."

This was the consensus up until mid-2011. The most significant change in the volume and size of deals seen by firms has been in terms of having a pipeline of mandates. "The pipeline is good, a year ago we didn't have a pipeline... financing is back to some extent, Nordic banks primarily, but there are still some gaps in value expectations," says one partner.

Private equity accounts for a large proportion of the market - "it has been fuelling growth in Sweden in the past decades" says one lawyer - and many of the major players such as Nordic Capital, EQT, Triton, Altor and Bain Capital completed large acquisitions. The tempo was picking up in 2011 with some notable differences to the earlier boom years.

"Buyers are still very cautious and not easily being drawn into auction processes and lawyers are being signed up very late in the cycle," says one partner. The partner adds that "a lot of damaged goods are being put on the market and it is a really tough fight to initiate an auction deal, a poker game really, with buyers asking for exclusivity early in the process". The number of participants in the auctions has also dropped, having the effect of squeezing the legal market.

The end result is an increasingly complicated market, with the chase for good assets creating heated competition between clients and firms. "Sometimes there are some very lively auctions, boardroom confidence is up, PR folks are definitely in the market, financing is up; there is more froth in the market than before," says a partner. The focal points of activity at the moment for PE are healthcare, consumer goods and education.

Swedish industry and Swedish blue-chips have remained strong throughout. One partner says it was a "very strong year last year, with 16 public M&A deals and private M&A was very good". There was also some notable investment by Chinese players, such as Geely's acquisition of Volvo in August 2010.

"Public M&A has been rather hectic, but very volatile and very jittery maybe only one in ten finishing," says a partner. Another adds that they have seen "very contested offers, bidding quite hostile, forced to be on borderline of what can be drafted, very tactical".