The M&A market today shows a marked improvement compared to 12 months ago, with increasing deal activity and rising valuations, although challenges remain.

Globally, M&A activity has picked up after a period of decline, with both deal volume and value showing notable growth over the past year. Corporate acquisitions have gained momentum, and private equity firms have become more active again as financing conditions improve. Lower interest rates have helped bridge the gap between public and private market valuations, encouraging more transactions. However, regulatory scrutiny continues to influence deal timelines and structures.

In Sweden, transaction activity has been on an upward trajectory, with the final quarter of 2024 being the strongest in over a year. IPO activity has also rebounded, and private equity involvement remains stable, signalling renewed investor confidence. While domestic buyers still play a key role, their overall market share has gradually declined, reflecting a more cautious sentiment in the local economy.

The improving deal landscape is also reflected in shifting market dynamics and strategic priorities among buyers. Companies are increasingly pursuing acquisitions to accelerate digital transformation, strengthen AI capabilities and enhance sustainability efforts. At the same time, industries with high fixed costs – such as energy, financial services and telecommunications – have seen a rise in large-scale consolidation deals.

Looking ahead, M&A activity in Sweden is expected to continue growing as market conditions become more favourable. However, regulatory developments and broader economic uncertainties will remain key factors shaping the pace of transactions.

In mid-March, CMS published an M&A study outlining the M&A trends for 2024, many of which are also reflected in the Swedish market.

Regarding deal structures, the use of earn-out models and vendor loans – which were prevalent 12 months ago due to market volatility – remains common. The CMS M&A Study highlights that the use of earn-outs has increased particularly in the Nordic countries, including Sweden. Both earn-outs and vendor loans help bridge the gap between buyer and seller expectations amid continued uncertainty around future earnings. Although liquidity in the credit market has improved, vendor loans are still being utilised to secure full financing for acquisitions on favourable terms. In the property market, there are clear signs of a sustained change in market conditions. Credit spreads have narrowed to very low levels and new issuance volumes are now approaching the record levels of 2021, driven by increased investor risk willingness and strong fund inflows. This makes it possible to raise funds in the bond market at attractive prices.

In relation to trends in applied purchase price mechanisms, the locked-box model for determining equity values continues to be the preferred approach, providing simplicity and certainty for sellers. Given the continuing uncertainty about future earnings, however, this model is expected to be used more frequently in transactions where the period between signing and closing is short, or where earnings are stable during that period, unless mitigated by earn-outs or other structures. The market also sees combinations of these two models, the locked-box model and the earn-out model.

Over the past 12 months, technological advances – particularly in AI – have also been a notable trend impacting on M&A activity. There is some indication that AI is playing an increasingly important role in M&A, both as a strategic investment focus and as a tool to improve the efficiency of key processes such as sourcing, screening and overall diligence. In addition, there are some signs that the use of generative AI can reduce effort, time and costs, underlining its potential to optimise M&A activities. On the other hand, questions regarding allocation of responsibility for outcomes produced in whole or in part by AI between the creator and the user of the AI, as well as safeguarding of confidential information when using AI, are still highly debated in Sweden.

In addition, private equity has played an increasingly important role and has been a significant participant in many transactions. The use of warranty and indemnity (W&I) insurance also continues to increase in the Swedish market. According to the CMS M&A Study, W&I insurance was used in 13% of the transactions surveyed in the Nordic region, representing a 5% increase. Favourable conditions and low rates in recent years seem to have driven the increased use of W&I insurance, although the market now appears to be stabilising.

In Sweden, several industries experienced significant M&A activity over the past 12 months. In the final quarter of 2024, transactions were mainly concentrated in the following industries:

• advanced manufacturing and mobility, representing 36%;
• technology, media and telecommunications, representing 23%; and
• consumer products, representing 19%.

Acquisitions of private companies are generally carried out in one of two ways: through a share transfer or an asset transfer. Both methods offer distinct advantages and are formalised through a purchase agreement, the structure of which varies depending on the complexity of the transaction.

In an asset transfer, the parties can agree on specific assets and liabilities to be included, which in turn allows for the exclusion of certain liabilities or problematic assets as well as the possibility to avoid carrying on certain company-specific history pertaining to the selling company.

In contrast, a share transfer involves the transfer of the entire company, including all assets and liabilities. This method can be beneficial as it enables the buyer to acquire an established business with an existing brand, business relationships and market presence.

Additionally, two or more companies may merge, in which the transferring company or companies may be absorbed by an acquiring company; however, the use of a merger structure when acquiring an external target is seldomly seen on the Swedish market. The choice of acquisition method is often tax-driven, where generally a share sale could be treated as tax-favourable from a seller’s perspective.

For public company acquisitions, the most common method is a public takeover bid, which can be presented as either voluntary or mandatory. A public takeover bid is announced through an offer document. Under Swedish law, if the offeror acquires more than 90% of the shares and voting rights of the public target, it has the right to squeeze out the remaining minority shareholders. It should also be noted that minority shareholders have the right to demand a squeeze-out if the offeror acquires more than 90% of the shares and voting rights.

In Sweden, the primary regulators for M&A activity are the following.

• The Swedish Securities Council (Aktiemarknadsnämnden) – works to promote good practices on the Swedish stock market through statements, advice and information. The Council is part of the self-regulation system on the stock market.
• The Swedish Financial Supervisory Authority (Finansinspektionen) – is responsible for granting licences, creating regulations and overseeing the financial market.
• The Swedish Corporate Governance Board (Kollegiet för svensk bolagsstyrning) – shall foster the positive development of Swedish corporate governance and ensure that Sweden maintains a relevant, effective and well-functioning corporate governance code for listed companies.
• The Swedish Companies Registration Office (Bolagsverket) – is not a regulator but a registration authority to which changes in company structures, such as the board of directors, must be noticed to become effective. Information filed with the authority becomes publicly available – for example, minutes from general meetings filed to register company amendments may be retrieved by the public.
• The Swedish Securities Market Self-Regulation Committee (Aktiemarknadens självregleringskommitté) – has issued takeover rules for Nasdaq Stockholm and Nordic Growth Market NGM as well as for Nasdaq First North, Nordic MTF and Spotlight Stock Market trading platforms. Issuers whose shares or other financial instruments are listed on a regulated market or a multilateral trading facility (MTF) must comply with the rules and requirements applicable to the specific market on which their securities are listed or traded. The Securities Council is also responsible for interpreting and assessing exemption requests regarding these rules.
• The Inspectorate of Strategic Products (Inspektionen för strategiska produkter) – controls the exportation of military equipment and dual-use products, and is the Swedish screening authority for foreign direct investments.
• The Swedish Competition Authority (Konkurrensverket) – monitors corporate acquisitions to ensure that companies comply with competition law. Acquisitions must be notified to the Swedish Competition Authority if the annual turnovers of the involved companies exceed certain threshold values set by the Competition Act, as outlined further in 2.4 Antitrust Regulations.

In 2023, new legislation regarding the review of foreign direct investments came into effect. The legislation aims to prevent foreign investments in Swedish activities that are deemed sensitive and potentially harmful to Sweden’s national security or public order and safety. It applies when a foreign investor intends to invest in operations within critical sectors, such as (but not limited to):

• security and defence;
• energy;
• telecommunications;
• IT infrastructure;
• transportation;
• healthcare; and
• research with security implications.

Investments in these areas are subject to a notification requirement, meaning that foreign investors must report the acquisition to the Swedish Inspectorate of Strategic Products (ISP) before the transaction is completed. As a result, the foreign direct investments regulation has been given a very wide scope of application – it is generally more likely than not that an investment will be notifiable, even though the vast majority of notifications are left without action. The ISP has authority to review, block or impose conditions on the investment if it is deemed to pose a security risk. This has the effect that a notifiable transaction cannot be signed and closed immediately afterwards.

The ISP has an initial 25 working days to investigate and decide whether a notified transaction poses a risk under the legislation. Before the end of the initial period of 25 working days, the ISP must decide whether to either leave the transaction without action or initiate an in-depth review. If the ISP decides that the investment is a foreign direct investment in a protected activity under the legislation and initiates an in-depth review, the ISP has three months’ additional time to investigate and then decide to approve or prohibit the notified transaction.

However, the legislation has been criticised (not least from a practical perspective), suggesting that it needs refining to ensure that only investments in sensitive businesses need to be brought to the ISP.

Both Swedish and EU competition laws are relevant considerations in corporate acquisitions in Sweden. The Swedish Competition Act contains regulations for the review of certain M&A, referred to as “concentrations”. According to the Competition Act, a concentration should be prohibited if it significantly impedes effective competition within Sweden as a whole or a substantial part of it. If less restrictive measures are sufficient to address the harmful effects, these may be considered instead of an outright prohibition. A concentration must be notified to the Swedish Competition Authority if the combined turnover of the involved companies in Sweden in the previous fiscal year exceeds SEK1billion and at least two of the companies involved had a turnover in Sweden exceeding SEK200 million each in the previous fiscal year.

However, if a merger or acquisition is being reviewed by the European Commission, it cannot also be reviewed by the competition authorities of the EU member states. Whether an acquisition should be notified to the European Commission or to a national competition authority is determined by the turnover of the companies involved. If the companies involved operate in several EU member states and their combined turnover exceeds EUR2.5 billion, the acquisition will have what is referred to as a “community dimension” and must be reviewed by the European Commission. If the acquisition meets the thresholds to be notified to the European Commission but is only deemed to affect competition within a limited geographical market such as Sweden, the companies may request that the European Commission refer the case to the Swedish Competition Authority.

In Sweden, there are specific regulations in place to protect employees in an acquisition by way of an asset transfer. Under the Swedish Employment Protection Act (1976:580), the rights and obligations arising from employment contracts of relevant employees transfer to the acquirer when a business or part of a business is transferred. Swedish law also provides further protection for employees in such circumstances. For instance, a transfer of a business cannot serve as grounds for dismissal.

Additionally, if the former employer was bound by a collective bargaining agreement, the new employer is generally required to adhere to the same agreement. The employment protection regulation is especially relevant in the case of a transfer of assets, since the seller in such transactions typically transfers all or part of its operations, leading to employees effectively acquiring a new employer, whereas the employer remains the same in a transfer of shares. Even though it is more unusual, under certain circumstances employment protection could become relevant in a transfer of shares in the form of a notification requirement in relation to trade unions.

Swedish labour legislation contains provisions on negotiations between employers or employers’ organisations on the one hand and employees’ organisations on the other before (for example) the employer takes a decision on a major change in its activities. An employer’s obligation to negotiate before a decision on a major change in its activities is not directed at individual employees, but is directed at trade unions that shall safeguard the employees’ rights and interests. The obligation to negotiate shall be fulfilled on the employer’s own initiative with the trade union to which it is bound by a collective agreement.

Furthermore, restrictive covenants – such as non-competition, non-solicitation and customer protection – are often included in senior management employment contracts in Sweden. Labour legislation imposes restrictions that limit how extensive and far-reaching such clauses can be. If a clause is excessively restrictive, in other words not reasonable, it risks being declared invalid and void in its entirety by a court. Consequently, the pacta sunt servanda principle may be set aside by the courts.

The case law of the Swedish Labour Court demonstrates that the court takes a restrictive approach to non-competition clauses in employment contracts. When assessing the reasonableness of such a clause, the Labour Court conducts a comprehensive assessment. This assessment takes into account:

• the extent to which the employer has a legitimate interest in imposing the restriction;
• the extent to which the non-competition clause restricts the employee’s ability to engage in professional activities either as an employee or as a self-employed individual; and
• whether the employee receives compensation during the period of restriction or whether the employee’s salary and terms of employment have been determined in light of the restrictions imposed by the clause.

Other factors may also be considered, such as the employee’s position and length of employment, and whether the clause was the subject of genuine negotiations between the parties.

An operator engaged in activities that are significant to Sweden’s national security, or that are covered by an international security protection commitment binding on Sweden, must, according to the Security Protection Act (2018:585), conduct a special security protection assessment and suitability review, and must consult with a supervisory authority if the operator intends to transfer security-sensitive operations. Security protection refers to the safeguarding of sensitive operations against espionage, sabotage, terrorist crimes and other offences that may threaten operations, as well as the protection of other classified security-sensitive information.

The supervisory authority, the ISP, has the power to order the operator to take measures in accordance with the Security Protection Act and the regulations issued under it. If an order is not complied with, or if the transfer is deemed inappropriate from a security protection perspective, even after additional measures have been implemented, the supervisory authority may decide that the transfer is not allowed to be carried out. Any transfer conducted in violation of such a prohibition is deemed invalid.

As previously mentioned, the ISP is also responsible for reviewing and deciding on foreign direct investments in protected activities (see 2.3 Restrictions on Foreign Investments). Between 1 December 2023 and 31 December 2024, the ISP received 1,377 notifications, of which only one investment was prohibited. However, the vast majority of the notifications were a result of the foreign direct investments regulation rather than the Security Protection Act.

As most M&A disputes are subject to arbitration, and since decisions are generally kept confidential, there have not been many significant court decisions in the last three years relating to pure M&A matters.

However, in 2024, the Supreme Court decided a precedent-setting case concerning the right to dividends of former shareholders whose shares had been redeemed. The case concerned a Central Securities Depository company (a “CSD company”) that had issued preference shares, and the question was whether the company was obliged to pay dividends to former preference shareholders if the record dates fell after the shares had been redeemed.

The Supreme Court held that, in the context of a dividend resolution in a CSD company, it is a fundamental requirement and a condition for a dividend claim that the relevant share is not cancelled or invalidated by a lawful redemption process on the record date. Consequently, the former shareholder had no further claim against the company as its shares were cancelled prior to the dividend payment date.

The case could become increasingly relevant given that a trend is being seen of listed companies tending to resolve on dividends on the annual meeting to be paid in two or more tranches during the year.

The Swedish takeover law is primarily based on the Takeover Directive (2004/25/EC). The key regulations can be found in the following:

• the Securities Market Act (Lag (2007:528) om värdepappersmarknaden); and
• the Act on Public Takeovers (Lag (2006:451) om offentliga uppköpserbjudanden på aktiemarknaden); and
• the Takeover Rules for Regulated Markets (Takeover-regler för reglerade marknader), which is a part of the self-regulation.

Nasdaq Stockholm and the Nordic Growth Market (NGM) have issued identical rules for their respective regulated markets. Apart from having their own disciplinary committee responsible for the surveillance of the compliance with the regulatory framework by members of the exchange, they have both delegated to the Swedish Securities Council (Aktiemarknadsnämnden) the task of interpreting the corporate governance code issued by the Swedish Corporate Governance Board (as described below) and assessing exemption requests in relation thereto.

The Swedish Securities Market Self-Regulation Committee (Aktiemarknadens självregleringskommitté) has issued takeover rules for Nasdaq First North, Nordic MTF and Spotlight Stock Market trading platforms. These rules essentially correspond to those for companies whose shares are admitted to trading on a regulated market. The Securities Council is also responsible for interpreting and assessing exemption requests regarding these rules.

The Swedish Corporate Governance Board has issued the Swedish Corporate Governance Code. The Code, updated 1 January 2024, acts as a complement to legislation and other regulations by specifying a set of norms for good corporate governance at a higher level of ambition than that required by the statutory regulation. The Code applies a comply-or-explain mechanism, potentially allowing listed companies to deviate from the Code as long as they can explain the rationale behind such deviations.

There have been no significant changes to takeover laws or practices in the past 12 months. However, and in addition to the updated Swedish Corporate Governance Code described above, the Swedish Securities Market Self-Regulation Committee’s revised takeover rules came into force on 1 January 2024. The amendments primarily incorporate the Securities Council’s established practice in various matters related to public takeover offers. In addition, the levels of sanctions for breaches of the rules have been increased.

For tactical reasons, offerors may choose to acquire shares in the target company before approaching its management or shareholders or launching a formal offer. Although stake-building is permitted in Sweden, it is subject to certain restrictions and disclosure requirements. Offerors must also ensure that they do not have undisclosed inside information beyond their own offer plans.

Additionally, stake-building may influence both the value and structure of a subsequent offer and could trigger disclosure requirements or mandatory offer obligations. To ensure equal treatment of shareholders, takeover rules require that the terms of a public takeover offer cannot be less favourable than the terms of share acquisitions made by the offeror within six months before, during or after the offer period.

In Sweden, the material shareholding disclosure thresholds and filing obligations are set out in Chapter 4 of the Swedish Financial Instruments Trading Act (1991:980), which implements the Transparency Directive (2004/109/EC). These rules apply to shares admitted to trading on a regulated market for which Sweden is the home member state.

The applicable disclosure thresholds are 5%, 10%, 15%, 20%, 25%, one third, 50%, two thirds and 90% of the share capital or voting rights. These thresholds are triggered by acquisitions, disposals, share lending, the return of borrowed shares or other relevant events.

A shareholder who reaches, exceeds or falls below one of the applicable disclosure thresholds must notify both the Swedish Financial Supervisory Authority and the company concerned.

The disclosure obligations also apply to share-related instruments, such as depositary receipts with voting rights, non-standard options, derivatives, warrants, borrowed shares and convertible instruments.

The reporting thresholds are set by law, and as such they cannot be altered through provisions in the articles of association. Additionally, there are no specific rules that directly address barriers to stakebuilding, other than potential restrictions concerning access to inside information, reporting obligations and mandatory offer requirements.

Dealings in derivatives are allowed under Swedish law.

The European Market Infrastructure Regulation (EMIR) sets out rules for derivatives trading. It requires all derivatives contracts to be reported to a trade repository, with the responsibility for reporting resting with the counterparties. However, counterparties may delegate this obligation to a third party.

EMIR also sets out requirements for the mandatory clearing of certain over-the-counter (OTC) derivatives through a central counterparty (CCP). The European Securities and Markets Authority (ESMA) provides guidance on which derivatives are subject to this clearing obligation. Exemptions may be granted to counterparties within the same group and, during a transitional period, to certain pension schemes.

Derivatives and other financial instruments conferring rights to underlying shares listed on a regulated market are subject to the same disclosure thresholds and reporting obligations as shares (see 4.2 Material Shareholding Disclosure Threshold).

As mentioned previously, EMIR has introduced reporting requirements to ensure transparency in derivatives markets. Therefore, all trades in OTC and exchange-traded derivatives must be cleared and reported to the ESMA register in accordance with EMIR.

In Sweden, shareholders are not generally required to disclose their intentions when acquiring shares. However, disclosure obligations apply in certain cases:

• ownership disclosure obligations – disclosure is required when surpassing ownership thresholds (see 4.2 Material Shareholding Disclosure Threshold);
• mandatory offer rule – exceeding 30% of voting rights triggers a mandatory offer, revealing control intentions (see 6.2 Mandatory Offer Threshold); and
• takeover offers – a full public offer requires disclosure of motives and expected consequences.

Under Swedish law, the requirement to disclose a transaction to the public depends on whether a listed company is involved.

Private M&A transactions are not subject to public disclosure. However, regulatory obligations, such as the need to register changes in ultimate beneficial owners with the Swedish Companies Registration Office or to comply with competition law, could result in information relating to the transaction becoming publicly accessible.

Inside Information

According to the Market Abuse Regulation (MAR), the general rule is that an issuer must disclose inside information that directly concerns it to the public as soon as possible.

The issuer must ensure that the information is made public in a manner that allows for rapid access and enables the public to assess it fully, accurately and in a timely manner. Where applicable, the disclosure should also be made through the officially appointed mechanism referred to in Article 21 of Directive 2004/109/EC of the European Parliament and the Council.

In the case of inside information disclosure, an issuer may not combine it with marketing activities, and all publicly disclosed inside information must be published and maintained on the issuer’s website for at least five years.

Under the new EU Listing Act (EU) 2024/2809, the disclosure obligations regarding inside information under Article 17 of the MAR have been revised in certain areas.

Public Takeover

In a takeover situation, the companies involved are also required to disclose certain information to the public (see 7.1 Making a Bid Public).

Due to the strict regulation in the MAR, requiring inside information to be made public as soon as possible, market practice on timing of disclosure does not differ from legal requirements.

However, the issuer rulebooks of Nasdaq Stockholm and Nordic Growth Market set out specific rules for disclosure of information not deemed as inside information but which is still of necessity for the shareholders and investors, such as a notice of summoning to a general meeting in an issuer.

In Sweden, it is common to conduct financial and legal due diligence in a negotiated business combination. Financial due diligence primarily focuses on assessing the financial health and stability of a business unit during an acquisition, with accurate financial information being crucial for decision-making. This process typically involves a thorough review of the target company’s financial statements, assets, liabilities, cash flow, debt levels and future profit forecasts. Legal due diligence, conducted to ensure compliance with applicable laws and regulations, often involves the examination of employment contracts, agreements, litigation history, intellectual property rights and other legal matters.

Additionally, operational, tax and commercial due diligence are also common practices during the acquisition process, each focusing on specific aspects of the target company’s operations, tax obligations and market positioning.

In relation to public offers, the possibility to conduct a due diligence process is limited by the target’s restriction on sharing inside information without making it publicly available to the market.

Neither standstills nor exclusivity are common in public acquisitions. However, in acquisitions of private companies an exclusivity period is often agreed upon between the acquirer and the shareholder(s) of the target at some point of the acquisition. Such exclusivity can be agreed either at an early stage in the process, letting a sole potential acquirer perform their due diligence undisturbed by competing offers, or at a later stage following the potential acquirers having presented a preferred bid in an auction process. 

As no share transfer agreement is entered into in a public takeover, it is not common for tender offer terms and conditions to be documented in a definitive agreement. The bidder usually submits either an unconditional binding offer or an offer that is subject to certain conditions being met. Such conditional offer typically becomes binding immediately once the conditions set out are met. The bidder can include reservations in the offer; if the conditions are not fulfilled, the bidder can waive any condition presented, thus making the offer binding.

The process of acquiring or selling a company in Sweden typically takes one to six months from the start to the signing of the share purchase agreement. However, the timeframe varies significantly and many transactions take considerably longer. The timeframe is (among other factors) affected by the extent of the due diligence that needs to be conducted, and potential legal and purchase price discussions arising out of such due diligence. Following signing of the share purchase agreement and provided that closing has not occurred in direct connection with the signing of the share purchase agreement, acquisitions are generally closed within one to three months, provided that no in-depth scrutiny has been called for by any authority such as the FDI and notification to the Competition Authority, which may prolong the process.

In public company acquisitions, the timeline for the process depends (besides other factors) on the acceptance period that is set out by the offeror. An example of an acquisition with a long acceptance period – which also illustrates how the acquisition process may be shortened or lengthened during the offer – is as follows. On 22 January 2024, La Française des Jeux SA (FDJ) announced a recommended cash offer to holders of Swedish Depositary Receipts (SDRs) in Kindred, offering them the opportunity to transfer all of their SDRs to the company. The initial acceptance period for the offer was 19 November 2024, which was brought forward to 2 October 2024 following receipt of regulatory approvals.

Following the expiry of the acceptance period, on 3 October FDJ announced that the offer had been accepted to the extent that FDJ would become the owner of 90.66% of all outstanding SDRs in Kindred and declared the offer unconditional. Subsequently, FDJ acquired a further approximately 1.11% of Kindred’s SDRs. However, FDJ decided to further extend the acceptance period until 18 October 2024. By the end of the extended acceptance period, FDJ had acquired an additional 6.83% of Kindred’s outstanding SDRs. As a result, FDJ controlled a total of 98.60% of the outstanding SDRs in the company.

On 23 October 2024, FDJ initiated the squeeze-out of the remaining SDRs in Kindred and requested that Kindred’s board of directors apply for the delisting of the SDRs from Nasdaq Stockholm, thereby completing the public takeover process.

Under to the Act on Public Takeovers applicable to shares listed on a regulated market, a mandatory offer is triggered when a person who previously held no shares or held shares representing less than 30% of the voting rights acquires additional shares carrying voting rights, and thereby, alone or together with a group of persons acting in concert, directly or indirectly exceeds the 30% threshold. In such a case, the relevant person must make a mandatory offer for the remaining outstanding shares.

Even though the Act on Public Takeovers solely applies to shares listed on a regulated market, corresponding rules included in the self-regulatory structure apply to shares listed on, for example, an MTF platform.

Private M&A Transactions

In private M&A transactions in Sweden, cash is the primary form of consideration. To bridge valuation gaps, earn-outs are commonly used, where part of the purchase price is contingent on the target company achieving specific financial or operational milestones after closing.

In transactions where one or more sellers are involved in the day-to-day operations of the target company, reinvestment, which effectively means payment in shares, is relatively common in private equity buy-and-build deals. This approach allows the sellers to retain an ownership stake in the business, creating shared incentives with the buyer and encouraging continued involvement in the business.

In one recent case, the authors observed that where there was a value gap; the listed buyer offered warrants in the buyer in addition to cash, in order to reach a bid level acceptable to the sellers, even though the use of earn-outs as previously described is more commonly seen. A value gap could also be closed by the buyer withholding a part of the consideration by issuing a promissory note rather than paying upfront in cash, resulting in a deferred payment.

Public M&A Transactions

In a public takeover situation, cash is also the primary form of consideration. An offeror may offer cash, shares or a combination of both. However, in a mandatory offer, the offer must include a cash alternative, ensuring that all shareholders have the right to receive cash payment. Shareholders have the option to reject the offer if they consider it insufficient, in which case the bidder would be required to raise the offer to meet a price level that is acceptable to the seller collective.

According to Swedish takeover rules, mandatory offers must be unconditional. However, it is permitted to include a condition that the company must obtain the necessary regulatory authorisations. A takeover procedure is therefore typically structured in such a way that the offeror first makes a voluntary offer before the mandatory bid rules come into force, allowing the offeror to set the terms of the offer. Common conditions include:

• that the offer will be accepted provided that the offeror acquires shares representing more than 90% of the total issued shares of the target company;
• that the offeror shall obtain all necessary approvals, authorisations, decisions and other necessary actions from the relevant governmental authorities or similar bodies on terms acceptable to the offeror;
• that the target company shall refrain from taking any action that may adversely affect the terms and conditions of the offer; and
• the right to waive one or more conditions, thereby rendering the offer unconditional.

In Sweden, the typical minimum acceptance threshold for a takeover bid is over 90% of the shares and voting rights. If this threshold is reached, the offeror may initiate a squeeze-out procedure under the Swedish Companies Act, whereby the remaining minority shareholders’ shares are compulsorily acquired. Additionally, minority shareholders can also demand a squeeze-out if a majority shareholder holds over 90% of shares. According to the Swedish Companies Act, minority shareholders must receive cash compensation for their shares in a squeeze-out process.

Another key control threshold is ownership of more than 50%, which allows a shareholder to take decisions by simple majority, thus effectively controlling the company by (for example) being able to solely appoint the board. With this level of control, the shareholder can effectively direct the company’s management and strategic direction. It should be noted that a company’s articles of association may stipulate majority requirements that differ from those set out in the Swedish Companies Act. These requirements may require a qualified majority or unanimity for certain decisions, but may also allow a lower voting threshold than would otherwise apply. However, for certain decisions, the law sets a minimum voting threshold that cannot be lowered by the articles of association.

Furthermore, holding two thirds of the shares gives a shareholder the power to pass major corporate resolutions, including amendments to the company’s capital structure, and changes to the articles of association. However, it is unusual for the acceptance threshold to be set as low as 50%. Offerors typically set a higher threshold but retain the option to waive this condition later. Therefore, if the initial acceptance level is not met, they can still proceed with the offer, provided they have secured control by exceeding the 50% threshold. In such cases, the bid becomes unconditional and binding.

Private M&A Transactions

Conditions on financing being obtained occur, although they are not very common. This is mainly due to commercial reasons as the seller would typically require the acquirer to secure financing ahead of entering into the share purchase agreement by not accepting such condition precedent.

Public M&A Transactions

In a takeover situation, an offer may only be submitted after preparations proving that the offeror has the financial capacity to carry out the offer. For a full or partial cash offer, the offeror must have sufficient financial resources to cover the entire consideration offered in cash. If an acquisition loan is required and its payment conditions are not listed as conditions for the completion of the offer (even if the room for such completion condition is limited), these conditions must be ones that the offeror can practically ensure being fulfilled. The full offer amount, assuming full acceptance, must be available for immediate drawdown under these conditions when the offer is made public.

Private M&A Transactions

In private transactions, the parties are generally free to agree on such provisions.

Public M&A Transactions

Under Swedish law, deal security measures such as break-up fees, match rights, force-the-vote provisions and non-solicitation clauses are strictly limited and generally not allowed without specific approval. The takeover rules require the target company’s board to act in the best interests of all shareholders and to avoid measures that could unfairly favour one offeror over another or restrict shareholder choice.

As a general rule, the board of directors of the target company is not allowed to enter into any offer-related agreements with the offeror. Consequently, break-up fees are not allowed. However, under certain circumstances, the Securities Council may grant exemptions and allow a protective measure. It should be noted that the bidder often secures the support of key shareholders before making the offer (see 6.11 Irrevocable Commitments).

Private M&A Transactions

In addition, shareholders in private M&A transactions may enter into a shareholders’ agreement that allows the parties to agree on additional provisions on corporate governance and their internal relationship as shareholders. Such provisions may include the right to appoint board members or veto certain proposals/resolutions at the general meeting or board meetings. However, under Swedish law, shareholders’ agreements are generally not binding on the company, and any breach of the agreement must therefore be resolved between the shareholders.

Public M&A Transactions

As mentioned previously, a theoretical key control threshold is over 50%, which gives a shareholder various rights, such as the right to appoint the board of directors. Another key control threshold is two-thirds ownership, which enables a shareholder to pass important company resolutions (see 6.5 Minimum Acceptance Conditions). However, a shareholder can effectively control the company even with a lower percentage of voting rights than previously set out, due to the fact that not all shareholders will be present and cast their votes at the general meeting. In practice, the ability to control a company through a lower shareholding percentage depends on the overall ownership structure. It is easier to exercise control in a company with a widespread ownership consisting of a large number of shareholders holding small amounts of shares each. In addition to gaining control by purchasing more shares, a shareholder may acquire governance rights by entering into voting agreements with other shareholders.

In Sweden, a shareholder may vote by proxy. According to the Swedish Companies Act, a shareholder who is not personally present at the general meeting may have their rights exercised by a proxy by means of a written power of attorney signed and dated by the shareholder. Such power of attorney may not be older than one year; however, if a longer maturity is expressly stated in such power of attorney, it may be up to five years old.

The main rule in the Swedish Companies Act is that the company may not engage in proxy solicitation. The rationale behind this prohibition is to prevent the board of directors from using the company’s resources (such as shareholder registers or other administrative assets) to influence the outcome of votes at general meetings.

According to the Swedish Companies Act, a majority shareholder holding more than 90% of the shares in a company has the right to initiate a squeeze-out of minority shareholders, while minority shareholders have the right to demand a corresponding buy-out. This right applies regardless of whether the shares were acquired through a public offer or otherwise.

If the majority shareholder invokes its right to a squeeze-out, the minority shareholders may either accept the offer or dispute its terms. Should they challenge the redemption or refuse the offered price, the matter is referred to an arbitration tribunal for adjudication. The tribunal has the authority to rule on key issues, such as the validity of the squeeze-out right, whether the majority shareholder should be granted early access to the shares, and the final redemption price payable to the minority shareholders. The arbitration shall be conducted in accordance with the Swedish Arbitration Act (1999:116), unless the Swedish Companies Act provides otherwise. The arbitration shall result in an arbitration award. Once the tribunal has rendered its award, ownership of the shares is transferred to the majority shareholder, thereby concluding the squeeze-out process.

In takeover situations, offerors may seek to secure commitments from major shareholders through irrevocable undertakings, whereby the shareholder agrees to accept the offer if it is made. Such agreements can be negotiated before a formal offer is submitted, strengthening the offeror’s position and increasing deal certainty. While some irrevocable undertakings are unconditional, others may include outs, allowing shareholders to withdraw their commitment if a superior competing offer arises.

Under Swedish takeover rules, the offeror must disclose the extent to which binding or conditional commitments to accept the offer have been secured from shareholders of the target company, or whether shareholders have expressed positive statements regarding the offer.

Public Takeover

Once the offeror has decided to make a takeover offer and entered into an undertaking with the regulated market to comply with the applicable takeover regulations, it must announce the offer as soon as possible. The main terms to include in such announcement include (for example):

• the price;
• any premium, alongside its calculation;
• how the offer is financed; and
• any conditions for completion.

Simultaneously, the information must be submitted to the stock exchange and the Financial Supervisory Authority.

In the event of a mandatory offer, the offeror must immediately disclose their shareholding in the company and, within four weeks thereafter, make a public offer for the remaining shares.

Inside Information

The MAR regarding inside information also applies to takeover offers, as the offers may constitute inside information (see 5.1 Requirement to Disclose a Deal).

The Prospectus Regulation stipulates a requirement to publish a prospectus if the public offer includes remuneration in newly issued shares in the offeror. A prospectus must be made publicly available prior to offering securities to the public or admitting securities to trading on a regulated market. However, there are several exceptions, which, if applicable, result in the publication of a prospectus not being mandatory.

The previously mentioned prospectus (see 7.2 Type of Disclosure Required) contains information about the issuer’s assets and liabilities, profits and losses, and its financial position and future outlook.

Private M&A Transactions

In a private transaction, there is no obligation for documents to be made publicly available. However, other transaction-related documents – such as corporate documentation produced to facilitate amendments to the board of the target or changes in the articles of association – become accessible for the public once filed for registration. This is due to the Swedish principle of public access to information, which ensures that documents held by public authorities are classified as public records. In certain instances, documents pertaining to individuals’ business or operational circumstances may be subject to confidentiality if there is a reason to believe that disclosure of the information could harm the individual – for example, in terms of competitive disadvantages.

Public M&A Transactions

In the case of a public takeover, the offer document must be made public, and the board of the target company is required to disclose its opinion on the offer, along with the reasons for this opinion, at least two weeks before the expiry of the acceptance period.

Directors owe a primary fiduciary duty to the company and all its shareholders. They are required to act in the best interests of the company as a whole and to ensure fair and equal treatment of all shareholders. Directors must not take any action that is likely to give an undue advantage to certain shareholders or other parties to the detriment of the company or its shareholders.

In the context of public takeover offers, the directors must act in the interests of all shareholders in relation to the offer. Directors have a central role to play in this process and should endeavour to act consistently in the best interests of the shareholders. Directors should not act in their own interests or be guided solely by the interests of one or more individual shareholders. Where more than one offeror is involved, the directors should not unduly favour one offeror over another. Chapter 5 of the Act on Public Takeovers contains provisions that prohibit the board from taking any action without shareholders’ approval if such action is likely to adversely affect the conditions for launching or implementing the offer.

In Sweden, the use of independent bid committees is relatively common, especially when conflicts of interest arise. While not mandatory, these committees ensure fairness and objectivity when evaluating offers presented to the company. In such cases, the committee protects the interests of minority shareholders and ensures an impartial evaluation of the offer.

The approach in Swedish law has been that, in principle, a board member should not be liable for damages for bad business.

However, according to the Companies Act, a shareholder who has suffered damage as a result of a director’s wilful misconduct or negligence in the performance of their duties is entitled to compensation. Thus, a distinction needs to be made between whether it was a merely a bad business decision or whether the board member acted in misconduct or negligence.

Typically, any transaction – whether private or public – requires external legal advice, and it is common to involve financial advisers. In relation to certain cases where a public offer has been presented, the directors in the target are required to conduct a formal evaluation of the offer, a process that often involves engaging external specialists to issue a fairness opinion on the offer value in relation to the company.

The principles of conflict of interest between the board of directors, managing directors or shareholders and the company are well established and regulated under the Companies Act.

Member of the Board of Directors or Managing Director

According to the Swedish Companies Act, no member of the board of directors or managing director may participate in decisions concerning:

• an agreement between the company and the member themselves;
• an agreement between the company and a third party in which the member has a material interest that may conflict with the company’s interests; or
• an agreement between the company and a legal entity that the member is authorised to represent, either alone or together with another person.

Shareholders

Additionally, under the Swedish Companies Act, a shareholder may not vote, either in person or through a proxy, on the following matters:

• (i) legal proceedings against themselves;
• (ii) their discharge from liability for damages or other obligations to the company; or
• (iii) legal proceedings or discharge as referred to in (i) and (ii) involving another person in which the shareholder has a material interest that may conflict with the company’s interests.

Advisers

Before accepting an engagement, the company’s advisers normally ensure that potential conflicts of interest are assessed. In addition, lawyers in Sweden must comply with the Swedish Bar Association’s Code of Conduct, stipulating that a lawyer may not take on assignments where there is a conflict of interest. For example, a lawyer may not represent a client if the lawyer currently represents, or has previously represented, the opposing party in the matter. It is important to emphasise that the assessment of conflicts of interest applies to the whole law firm, meaning that no member of such firm is allowed to be in a position of conflict.

Hostile takeover offers are both authorised and common in Sweden. Nevertheless, hostile offers are less common than non-hostile offers. This is mainly due to the Swedish corporate culture, which emphasises co-operation between management and shareholders. Furthermore, there are strong legal protections for shareholders, such as the principle of equal treatment, which complicates hostile acquisitions and ensures that all shareholders are treated fairly.

As a general rule, the Act on Public Takeovers prohibits defensive measures in the event of a public takeover offer. If the board of directors or the managing director of a company has reason to believe that such an offer is imminent or has already been made, the company may not take any action that could prevent or hinder the implementation of the offer, unless authorised by the general meeting. However, the board of directors may, without the approval of the general meeting or an exemption from the Swedish Securities Council, seek alternative offerors (known as white knights).

The most common reactive measure against a hostile offer is for management to seek alternative offerors and initiate a structured auction process to maximise price competition.

Additionally, companies may include precautionary measures in their articles of association that address decision-making processes, board elections, share classes and corporate governance controls to protect against unwanted takeovers.

As mentioned previously, the board’s ability to enact defensive measures is highly limited, and generally it requires the shareholders’ consent. However, any actions taken by the board must be in the best interests of the company, which, in this context, reflects the collective interests of the shareholders.

Although the board may choose not to recommend the offer, it cannot prevent an offeror from making a public offer for the company’s shares, nor can it prevent a shareholder from accepting such an offer and ultimately acquiring the company, unless a consent clause is stipulated in the articles of association.

As mentioned previously, in most cases disputes related to M&A are settled by arbitration. Statistics for 2024 from the Arbitration Institute at the Stockholm Chamber of Commerce show that 57 disputes relating to M&A were registered, representing 28% of all disputes received by the Institute during the year, and making M&A the most common field of arbitration in Sweden.

Litigation in private M&A deals typically arises from warranty claims following closing of the transaction or in connection with calculation of earn-outs where the parties have differences of opinion on the earn-out to be paid, particularly disagreement on the underlying earn-out calculation principles.

In 2020 and 2021 – a period characterised by high market valuations – the authors noted that transactions included earn-outs calculated on the basis of an estimate of the further development of the target companies’ then-record results. In some cases, such earn-outs were granted by buyers using a buy-and-build structure with a strategy to consolidate certain sectors of the Swedish market. However, as the market subsequently declined, sellers faced unexpected consequences when the earn-outs became unattainable, or buyers experienced liquidity shortages preventing them from meeting their obligations under the earn-out agreements.

Above all, this led to an increase in disputes over earn-outs and may have affected the willingness of sellers to agree to earn-outs in general, especially in relation to certain categories of buyers.

Shareholder activism can manifest in various ways, one of which is the ability to block major public offers. If a shareholder takes control of 10% or more of the company’s shares, such shareholder prevents the offeror from initiating a squeeze-out.

In addition, there are rights that minority shareholders can use as a form of activism, although this is not as common. Minority shareholders holding at least 10% of the shares obtain certain minority rights under the Companies Act; and, as envisaged previously, certain decisions in the company require a 90% majority. By either utilising such specific minority rights, or simply by voting against shareholder resolutions requiring a 90% majority, the minority shareholders can directly influence corporate decisions and corporate governance. Through such actions, shareholders can assert their interests and challenge management’s plans, often aiming to protect their investments or advocate for a different direction for the company.

For example, shareholders holding at least one tenth of all shares may request the appointment of a minority auditor and a special examiner, with the application submitted to the Swedish Companies Registration Office, which also appoints the minority auditor and one or more special examiner. Furthermore, at the request of shareholders representing at least one tenth of the total number of shares, the general meeting shall decide on the distribution of half the profit for the year shown in the approved balance sheet after the deduction of certain items.

The authors see examples of activist activity by (for example) privately owned Swedish investment companies that focuses on building activist funds. Such companies acquire significant minority stakes in listed European companies and act as an active owner with the aim of creating long-term and sustainable value.

In Sweden, listed companies have historically maintained, and continue to maintain, different classes of shares with different voting rights pertaining to the different classes (a 1:10 ratio being allowed). This, together with the fact that it in Sweden it is historically common for listed companies to have one or a few shareholders holding a large percentage of the outstanding shares, makes it difficult for activist shareholders to force through any actions not approved by the majority shareholder. Thus, minority shareholders’ influence is often limited to blocking decisions and/or transactions rather than promoting or encouraging any suggestions of their own.

While there are minority protection rules in place, their scope is relatively limited. These rules are designed to safeguard the interests of minority shareholders, but they do not provide extensive protections in all situations.

As mentioned previously, owning more than 10% of a company’s shares grants shareholders the ability to block transactions, and they may thus interfere with completion of announced transactions or force the offeror to complete the offer at an acceptance level not enabling a squeeze-out.