NORWAY Trends and Developments Contributed by: Kai-Ståle Kristiansen, Pål Lieungh and Hedvig Moe, Advokatfirmaet Thommessen AS
national functions outside the defence sector). A mini - mum of 50% of the obligation must be fulfilled within Category I, and no more than 25% may be credited to Category III. A life-cycle clause extends the temporal reach of the regime: where upgrades, maintenance or updates of a certain magnitude are expected, the sup - plier must commit at the outset to undertake industrial co-operation on future contracts, regardless of their size. Bids that do not accept the requirements in full must be rejected. For the Norwegian defence supply industry, indus - trial co-operation agreements are the most important instruments for international market access. The Nor - wegian defence market is, in isolation, too small to sustain a competitive defence industry – Norwegian defence companies have accordingly developed into export-oriented businesses with internationally com - petitive high-tech expertise. Recent experience shows that many Norwegian players are seeking expertise in export control regulations and procurement processes in other countries, driven in part by the anticipated utilisation of industrial cooperation agreements in con - nection with Norwegian defence procurements from abroad. With a procurement investment plan (Future Acquisitions for the Defence Sector 2026–2033 ( Frem- tidige anskaffelser til forsvarssektoren (FAF) 2026– 2033)) outlining major projects across all branches – including new frigates, submarines, air defence systems, main battle tanks and standardised vessels – the volume of industrial co-operation agreements is expected to increase significantly. The industrial co-operation regime and the expected consolidation wave in the Norwegian defence supply chain are closely connected. Security clearance, cer - tification and qualification requirements concentrate activity around accredited platforms rather than the broader market. A self-reinforcing dynamic emerges: increased industrial co-operation volumes create demand for competent sub-suppliers with security clearance and qualified personnel which, in turn, enhances the value of such businesses for poten - tial acquirers. Much of the lower-tier supplier base remains founder-owned and sub-scale, creating clear opportunities for bolt-on acquisitions or platform for - mation.
This presents potential tension for the Norwegian authorities, with the government wishing to strengthen co-operation with SMEs and facilitate broader indus - try participation in defence while consolidation may concentrate ownership of qualified suppliers among financial investors or foreign strategic buyers. Owner - ship control under the Security Act, with notification thresholds already from 10% (not yet in force), pre - sents itself as a regulatory tool for ensuring that con - solidation occurs within a framework that safeguards M&A activity in European defence has accelerated at the intersection of politically mandated budget increases and capacity constraints in the supply chain. Market analysis of completed transactions in the period 2020–26 shows increasingly higher multi - ples with a structural spread: the highest multiples are associated with businesses possessing proprietary IP, deep programme positions and certification barriers that cannot easily be replicated. national security interests. M&A and Consolidation A consolidation trend has emerged in Norway and the Nordics. Buy-and-build platforms have acquired founder-owned suppliers, and new platforms have been formed through the merger of founder-owned businesses with stated IPO ambitions. Norwegian leading sub-suppliers have acquired other Nordic defence electronics manufacturers, and Norwegian primes are using M&A actively for capacity expan - sion, including acquisitions of international technology capabilities. Buyer interest is underpinned by demand charac - teristics that are structurally shielded from ordinary business cycles: defence budgets are politically mandated. Private equity investors are drawn to pro - prietary technology, multi-year contract-based rev - enue streams and fragmented founder-owned supply chains where scale is key. Industry in Motion Norwegian primes are experiencing a historic growth phase. The largest actor has refocused as a technol - ogy and defence group through the demerger of its maritime business and targets a tripling of revenues by 2029, with an order backlog of NOK158 billion pro -
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