Capital Market Union and the integration of EU rules in the financial market area into the EEA Agreement and Norwegian legislation.
In the aftermath of the financial crisis, the EU continues its work on the revision of several key directives and regulations in the capital markets area and its work towards building a single market for capital across Europe continues. The Capital Market Union Action Plan of 30 September 2015 includes a list of over 30 actions to establish the building blocks of an integrated capital market by 2019. The latest developments includes a package that sets out criteria for simple, transparent and standardised securitisation (STS) and proposed amendments to the European Venture Capital Funds (EuVECA) and the European Social Entrepreneurship Funds (EuSEF) regulations, both of May 30 2017.
Following the solution in June 2016 of the constitutional obstacles that prevented the implementation of certain EU rules relating to the capital markets, considerably effort has been in place to work on the implementation. The Norwegian government-appointed expert committee mandated to propose implementation of EEA relevant securities legislation in Norwegian law has issued three individual reports; (i) the first report delivered February 1 2016 includes certain amendments to the Norwegian Securities Trading Act with regard to disclosures and periodical reporting, implementing the directive 2013/50/EU amending the Transparency Directive (directive 2004/109/EC); (ii) the second report delivered January 20 2017 includes certain amendments to the Norwegian Securities Trading Act and the repeal of the Act on Regulated Markets, implementing the directive 2014/65/EU on markets in financial instruments (MiFID II) and the Market in Financial Instruments Regulation (EU) No 600/2014 (MiFIR) and appurtenant legislation, which replaces the MiFID I; and (iii) the third report delivered June 23 2017 includes amendments of the Norwegian Securities Trading Act with regard to market abuse and sanctions, implementing the Market Abuse Regulation (EU) No 596/2014 of April 16 2014 on Market Abuse (MAR), replacing the Market Abuse Directive. We expect that the government will issue a common white paper to the Parliament this winter and that new rules likely will enter into force from early or mid-2018.
The mandate for the fourth and presumably last report from the expert committee concerns an assessment of the need for revision of the Norwegian takeover-rules regarding mandatory and voluntary offers of listed companies and procedural matters with regard to handling of cases for complaints commissions and courts regarding securities law issues delegated to a regulated market. We expect that the expert committee will provide this report in June 2018.
Even though the EU Market Abuse Regulation is still not implemented in Norwegian law, there are certain issues that due to the scope and effect of the Regulation already apply. One implemented issue concerns the duty to publicly disclose inside information, which as of April 1 2017 shall take place without delay regardless of whether or not it arises during the exchange or the market place trading hours.
Key M&A trends
Reduced activity levels in oil-related industries after the oil price fall in 2014 have affected other parts of the Norwegian economy, although the contagion effects are thus far limited, and for 2016, the M&A transaction volume improved significantly, with an 19.2% increase compared with 2015. The increase in deal volume is due to a more optimistic outlook for the Norwegian economy due to improved oil and gas prices, a weaker currency, and supportive fiscal and monetary policies, in combination with a strong global M&A market trend fuelling investor confidence. A total number of eight public takeovers and attempted takeover offers for listed companies were issued in the Norwegian market in 2016. The sector that has shown the strongest momentum in Norway in 2016 has been the industrial and manufacturing-sector. Together with TMT and the services sector, these sectors were the most important for Norwegian M&A in 2016. Entering 2017, the deal activity continues to improve by 7% for 1H 2017 compared with the same period in 2016. The reported deal values also improved significantly, with the average reported deal value increasing from €67 million for 1H 2016 to €286 million for 1H 2017.
The Norwegian offshore supply companies have been involved in a high number of restructuring transactions with the merger between Farstad Shipping, Deep Sea Supply and Solstad Offshore as the largest deal. There are still a considerable number of restructurings to be completed in this sector.
In 2016, the Norwegian PE market showed a 1.9% decline in reported volume compared with 2015. At the same time, deals involving private equity sponsors, (either on the buy- or sell-side) showed a significant increase in average reported deal sizes from €265m in 2015 to €368m in 2016. The private equity market continued to be driven by new investments and add-ons, but in 2016 we also witnessed a substantial increase in number of exits.
There has not been much change in the market for M&A deals. Nevertheless, large auction processes has become slightly less common than they were 24 months ago. In the past couple of years, we have observed an increase in the use of more tailored sales processes, particularly within the oil and gas segment, involving one or a very limited number of participants rather than full auction processes.