Exitpartner: Why investors are looking to Sweden’s ESG edge

Exitpartner has been brokering mid-market M&A deals in Sweden for more than a decade. During that time, the firm has noticed a growing interest in environmental, social and governance (ESG) issues among investors.

“It’s becoming more and more important, especially among younger, forward-looking investors,” says Roger Eriksson, an Exitpartner broker who covers the country’s mid southern region. “Companies in Sweden have a long history of good governance, but investors are now also looking much more closely at environmental and social issues.”

At the mid-market level, ESG is often about more than just formal policies and practices. How a company presents itself to investors can be just as important. Anders Bley, a Stockholm-based broker at Exitpartner, has seen investors walk away from a deal at the last minute after an owner expressed some old-fashioned social attitudes.

“The investors just left the table,” Bley says. “They were worried that the owner’s way of thinking ran through the whole company.”

Thankfully, such attitudes are increasingly rare. Sweden is one of the most progressive countries in the world and is widely recognized for its positive environmental policies.

Asset manager Robeco ranks Sweden second in its global sustainability index, which focuses on ESG metrics such as human and labor rights, climate and energy, institutions and environmental risks. It is also ranked third for its progress towards the UN’s Sustainable Development Goals.

This strong focus on ESG at the national level means that Swedish companies are generally ahead of the curve when it comes to sustainability. This may help to make businesses in Sweden and the rest of the Nordic region more attractive to international buyers as they factor in the costs associated with ESG compliance.

Sweden has made a lot more progress than other countries, Eriksson points out. But regulations are moving in the same direction globally, which will have implications for future compliance costs in countries that are behind the curve.

Indeed, Dealsuite’s own research shows that 95% of advisors say they expect ESG performance to have an effect on valuations of SMEs. Such high levels of confidence reflect a strong shift in attitudes to ESG issues among both investors and consumers.

PwC estimates that ESG-related funds will be worth US$33.9tn by 2026, with ESG assets on track to make up more than a fifth of total global assets under management within five years. 

As Exitpartner seeks to expand its horizons beyond Sweden, it sees the country’s strong ESG credentials as an important selling point. Since its founding in 2011, the firm has focused on domestic deals, but Eriksson has long harboured ambitions to broker cross-border deals. Working with Dealsuite has made that possible.

“It was difficult to reach out before — we just hadn’t found the right channels,” he says. “But now we have a way to reach out and others can also reach us.”

Using Dealsuite, Eriksson now has access to a much bigger pool of potential buyers and sellers, which he hopes will help to realize higher valuations as well as providing better opportunities for investors.

While Exitpartner has been looking to broker cross-border deals for several years, the timing now is better than ever. The pandemic has made cross-border deals easier as video meetings have become completely normalized. It takes the same amount of effort to meet virtually with an investor on the other side of the country, elsewhere in the Nordic region or even further afield.

Combined with Dealsuite, Eriksson is confident that Exitpartner is set for growth.