DENMARK Trends and Developments Contributed by: Morten Krogsgaard and Lennart Meyer Østenfjeld, Moalem Weitemeyer
business investments. Companies are tak- ing a more conservative approach, delaying expansion plans and new projects until there is more stability in the market; • energy costs: the war in Ukraine has had a profound impact on energy prices, which remain a significant concern for businesses and consumers alike. The increased energy costs have put additional pressure on operat- ing expenses for companies, further affecting their investment decisions; and • supply chain disruptions: on the back of the COVID-19 pandemic, global factors such as maritime security or potential trade restric- tions and tariffs continue to disrupt global supply chains. These disruptions have led to delays in production and delivery, increased costs and challenges in maintaining inventory levels, all of which contribute to the overall economic uncertainty. In response to rising inflation in 2023, the Dan- ish Central Bank increased interest rates. This monetary policy significantly impacted on bor- rowing costs and the availability of credit, mak- ing debt financing less attractive. Although the rising interest rates, along with proactive aus- terity measures by the Danish government, ini- tially risked triggering a recession, the Danish economy showed resilience and managed to overcome the downturn. However, mixed sig- nals from international markets and the ongoing geopolitical tensions mean that uncertainty per- sists in a significant way. Businesses and inves- tors are likely to continue adopting a cautious approach until there is more clarity on the global economic outlook. Adjustment to Financing Structures Uncertain market conditions led to significant adjustments in financing structures within the Danish market. There was a notable increase in
the use of equity financing and vendor financing, primarily driven by restricted access to attractive debt financing. This shift led to longer transac- tion completion times as both buyers and sellers adjusted their expectations in line with market developments. On a positive note, the increased use of equity and vendor financing underscored the market’s adaptability. Increased M&A Activity The Danish market experienced an increase in M&A activity in 2024 but transaction volumes remained well below 2021 levels. The M&A trans- actions in 2024 included large and high-profile transactions involving Danish buyers or targets evidencing a qualitative increase in deal value over the previous year. The average quarterly transaction value rose by nearly 15% in 2024 compared to 2023, primarily driven by corporate M&A activity where there were record-breaking transactions, both in terms of deal value and the ability to bridge debt capital markets and equity capital markets. The market for large private equity transactions remained quiet. Additionally, small transactions produced a quantitative increase in the number of deals compared to 2023. These deals did not require significant debt financing and were managed bilaterally with relationship banks and/or with the use of alternative financing structures. Sustainability-Linked Loans and Bonds Sustainability-linked loans have played a role in promoting environmental, social, and govern- ance (ESG) principles within the Danish mar- ket. While their prevalence has fluctuated, the ongoing commitment to sustainability by large
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