SWEDEN: An Introduction to Corporate/M&A

Sweden’s corporate/M&A market continues to be a dynamic and attractive space for domestic and international investors alike. As a cornerstone of the Nordic economy and an expat nation, Sweden’s business environment is characterised by its political stability, robust legal framework, and commitment to innovation and sustainability. These factors – coupled with Sweden’s strong tech sector, a defence industry on the rise, and a highly skilled workforce – make Sweden a hub for M&A activity.

Looking ahead, investors can anticipate a strong pipeline of cross-border transactions, particularly in the technology, renewable energy and defence sectors. They will also need to navigate an evolving regulatory landscape, including foreign direct investment (FDI) screening regulations.

Economic Conditions and Market Trends

After a cautious start to 2024 – mainly due to continued geopolitical tensions, global economic uncertainties and a more restrictive lending environment – the second half of the year witnessed a notable rebound in deal making. Key sectors such as technology, renewable energy and financial services led the surge, driven by resilient fundamentals and renewed investor confidence. As 2025 unfolds, promising economic indicators, a thriving start-up ecosystem, continued strong cross-border interest and a notable increase in defence spending are creating significant tailwinds, positioning Sweden for continued M&A growth in the coming year.

Tech-driven deals continue to dominate, with Sweden’s start-up ecosystem serving as a catalyst. Stockholm – often referred to as the “unicorn factory” – has fostered and continues to host a significant number of high-value start-ups, attracting interest from private equity and venture capital firms. The renewable energy sector is also experiencing continued growth – partly due to Sweden’s 2045 net-zero target, which mirrors broader global and EU wide net-zero efforts. This collective push has spurred M&A activity in wind energy, battery storage, hydrogen projects and related green technologies.

Although exposed to continued global trade tensions and currency fluctuations, Sweden’s open and export-oriented economy makes the country a strategic location for foreign investors looking to expand in Europe. Notably, interest from Asian and North American investors is increasing, driven by Sweden’s reputation for innovation and stability. Cross-border transactions have and will continue to remain a key feature of the Swedish market, as will continued momentum for public-to-private M&A deals.

Further, owing to Sweden’s NATO accession, deepening defence co-operation and heightened commitment to defence spending, the defence sector is emerging as a notable driver of M&A activity. According to the military budget proposal tabled in October 2024, the defence budget is set to increase substantially during the coming years and expenditure is forecast at approximately 2.4% of GDP for 2025. The expansion underpins growing interest in advanced defence systems and adjacent technologies, AI, cybersecurity and aerospace. Given the defence sector’s strategic importance, deals attract significant scrutiny, requiring thorough regulatory planning. Nevertheless, with security and innovation in sharp focus, the sector is expected to further impact Sweden’s M&A market going forward.

Legal and Regulatory Developments

The Swedish FDI Act, which entered into force in December 2023, continues to impact the M&A landscape in Sweden. While Sweden traditionally has maintained an open stance toward foreign investments, the regulation adds a level of scrutiny for deals involving sensitive sectors such as defence, technology, and critical infrastructure. During the past year, market participants have begun to gain a clearer understanding of how Swedish authorities apply the screening process, which is starting to make things more predictable for investors. However, compliance obligations, regulatory planning and extended deal timelines remain key considerations – particularly in cross-border transactions requiring clearances across several jurisdictions with various regulatory requirements and timelines, which can be frustrating.

Another area of focus is the ongoing modernisation of corporate governance practices. Recent developments, including the gradual broadening of Corporate Sustainability Reporting Directive (CSRD) applicability in Sweden, emphasise the integration of sustainability into strategic planning and supervision, enhanced ESG disclosure, and ethical guidelines. At the same time, we are starting to see the first signs of opposition and a call for deregulation – for example, the EU boosting industry competitiveness as a priority and the Swedish government’s initiative to ease the regulatory burden for businesses. Fuelled by Trump’s regulatory house-cleaning agenda, it remains to be seen what impact the deregulation lobbyists will have.

Opportunities and Challenges

Even though Sweden offers a favourable business climate, certain challenges persist. During 2022–23, Sweden dealt with its highest inflation since the early 90s, leading to spiralling interest rates that affected deal valuations and financing structures. As the economic pressure began to stabilise in 2024, interest rates gradually eased and inflation moderated, creating a more predictable transaction environment. This shift has restored investor confidence, improved access to capital, and bridged some of the “valuation gaps” witnessed during the recent past – altogether setting the stage for renewed growth in 2025. At the same time, private equity houses are sitting on substantial dry powder and exit horizons are approaching, positioning them to seize new opportunities and further accelerate deal flow.

While easing economic pressures have restored investor confidence as 2025 unfolds, the labour market – though highly skilled – faces continuing issues with limited availability in certain high-demand sectors (predominantly, within STEM (science, technology, engineering and mathematics)). This shortage can complicate post-merger integration by making it more difficult to retain and recruit essential talent. As a result, acquirers are placing greater emphasis on robust retention and recruitment strategies to help ensure successful deal outcomes.

Despite these challenges, opportunities abound. The Swedish government’s focus on fostering innovation creates fertile ground for investments in emerging technologies (eg, AI, fintech, biotech) and within the defence sector. At the same time, Sweden’s sustainability focus positions it as a front-runner in green M&A.

Key Insights for Investors

Investors evaluating deal targets in Sweden should consider the following.

• Strategic due diligence – enhanced and tailored due diligence, particularly around regulatory compliance, is increasingly vital for successful transactions.
• Navigating FDI regulations – early engagement with legal advisers can help mitigate risks associated with FDI screening mechanisms, thereby ensuring smoother transaction processes.
• Valuation strategies – adapting to current economic and geopolitical conditions requires flexible valuation and deal structuring approaches to balance risk and reward, particularly when looking at extended deal timelines.
• Talent retention – proactive strategies and programmes to address talent recruitment and retention can significantly impact the success of post-merger integrations.

Outlook

The Swedish corporate/M&A market is well positioned for continued growth, supported by its robust economy, innovative industries and commitment to sustainability. Although continued global geopolitical tensions affecting trade and regulatory changes require careful navigation, opportunities for new deals remain compelling. With a stable legal framework and a forward-looking business culture, Sweden emerged from 2024 with renewed momentum heading into 2025.

The strong rebound in the latter half of 2024 has fuelled optimism for deal flow across various sectors, especially in areas benefiting from Sweden’s emphasis on innovation and sustainability. Investors can expect a busy pipeline of cross-border transactions and, by staying attuned to market trends and leveraging Sweden’s unique strengths, firms and clients alike can look forward to a year of promising developments in the corporate/M&A sector.