Sweden’s Opportunities for IPO Market Revival in 2025 and Beyond

The IPO landscape across global markets has faced significant headwinds over the past three years due to turbulent macroeconomic conditions, including rising interest rates, high inflation and geopolitical tensions. 2023 was a challenging year for European IPO activity, with EMEA IPO proceeds down 24% year-on-year to USD22.19 billion. However, as we approach the end of 2024, European IPO activity has started to pick up again and reached proceeds over USD15.2 billion from nearly 69 IPOs in H1 2024. We are seeing the same trends in the Nordics as a whole, with proceeds over USD0.7 billion from ten IPOs in H1 2024 and further gains expected in 2025. Europe and the Nordic region are poised for a revival in IPO activity, capital raisings and spin-offs. Sweden, in particular, stands out with its well-established capital markets ecosystem, financial sponsor presence, strong institutional support and growing IPO mandates. This article analyses the key factors driving the surge and provides a forecast, highlighting key trends and developments from this point onwards.

IPO deal flow was limited in 2023. In Sweden, the downturn was pronounced. There was only one IPO on Nasdaq Stockholm last year, with proceeds coming in at USD210 million – well below the USD358 million in proceeds raised in 2022 and a far cry from the exceptional performance of the Swedish IPO market in 2021, when 24 IPOs on the Nasdaq Stockholm raised proceeds of USD9.53 billion.

Sweden has been directly affected by the slowdown in private equity exit activity. Over the past decade, more private equity players have entered the Swedish IPO market, and as private equity managers have extended the holding periods of portfolio companies through the rising interest rate phase of the cycle, the pipeline of IPO deals has dried up. According to Mergermarket, there were only 20 private equity exits in Sweden in 2023, the lowest number since 2016.

Private equity firms in Sweden and across Europe are facing increasing pressure to find exits for their portfolio companies, particularly in light of the growing backlog of unexited investments. As reported by Bain & Co., the volume of unexited portfolio companies is more than four times higher than during the 2008 financial crisis, signalling a significant build-up of companies awaiting liquidity events such as IPOs or strategic sales. This backlog, coupled with an environment of pent-up investor demand, is expected to drive significant activity in the IPO market in 2024 and beyond.

The Swedish market, in particular, is well positioned to capitalise on this trend. Known for its high reliance on equity capital, especially among small and medium-sized enterprises (SMEs), Sweden has long been a European standout in terms of its innovation and well-established equity financing ecosystem. With Sweden consistently ranked as the most innovative EU Member State by the European Innovation Scoreboard, private equity firms see the IPO market as a viable and attractive exit strategy. As Swedish SMEs rely heavily on equity financing to fuel their growth, the country has cultivated a strong investment environment that fosters innovation, which is attractive to private equity-backed companies looking for a successful IPO.

Sweden’s deep pool of institutional and retail investors further strengthens its attractiveness as a fertile ground for IPOs. Swedish pension funds, such as AMF and the AP funds, provide consistent institutional support for new listings, creating a robust demand for equity offerings. Similarly, family offices and a well-established retail investor base have historically shown a strong appetite for backing new IPO opportunities. After a relatively quiet period in 2022 and 2023, with limited IPO activity due to broader macroeconomic uncertainties, these investors have begun releasing and are expected to release further significant amounts of capital into the market throughout 2024 and into 2025, particularly for companies showing profitable growth.

Historically, equity raisings through accelerated bookbuilds (ABBs) have been frontrunners in the opening up of the IPO market, and in recent times there has been significant ABB activity, indicating an increased appetite for equity investments and a potential uptick in IPO activity to come. Looking at recent activity and further into the future, this trend is clear. SBB has spun off Sveafastigheter by way of an IPO, and several notable Swedish companies are reported to be considering IPOs in 2024 and 2025. These include Nordic Capital-backed NOBA, which has announced that it is evaluating strategic options, including an IPO.

As Sweden’s IPO market regains momentum in 2024, IPO mandates – instructions given to banks and advisory firms to manage public offerings – are becoming more frequent. Many companies that had postponed their public listings in 2023 and H1 2024 due to market volatility are now moving forward with their IPO plans. These companies are issuing Requests for Proposals (RfPs) to advisory firms, including investment banks and legal advisers, to manage the various aspects of going public.

The increase in RfPs is being driven by the renewed optimism in capital markets and need for sponsors to exit their portfolio companies, and is fuelled by the improved economic outlook and more beneficial interest rates. After several years of macroeconomic uncertainty and rising interest rates, which increased the cost of capital and deterred many companies from pursuing public listings, the recent shift towards lower and more stable interest rates is seen as a critical turning point. As interest rates and inflation decrease, companies face reduced costs of capital, making the financing of growth initiatives, expansions and other capital-intensive projects using the international capital markets a more attainable option. This is particularly advantageous for sectors such as technology, healthcare and industrials, where rapid scaling often requires substantial upfront investments.

Additionally, the lower-interest environment tends to make equity raising a more attractive option. This shift has significantly increased market confidence, encouraging businesses that had previously shelved their IPO plans to revisit these strategies and engage financial advisory firms for guidance. Consequently, banks and advisory firms are experiencing a notable surge in RfPs as companies seek to capitalise on these more favourable market conditions, positioning 2024 and 2025 as significant periods for a rebound in IPO activity across key sectors.

The IPO process typically begins with preparatory work, such as assessing financial statements, drafting a prospectus and engaging with potential investors. Companies are now engaging investment banks earlier in the process, seeking advice on the optimal timing and pricing for their IPOs.

The spike in IPO activity among sponsor-backed companies is also accompanied by an increase in dual-track processes, where companies are prepared for both an IPO and a potential M&A transaction, keeping the sponsors’ options open depending on market conditions.

The issuance of IPO mandates and RfPs is signalling a positive shift in the Swedish capital markets, with companies eager to take advantage of improved conditions. As banks, legal advisers and auditors receive more requests, they are playing a crucial role in shaping the future of the Swedish IPO market.

The Nordic IPO market, led by Sweden, is expected to experience a strong recovery from H2 2024 onwards. Looking ahead, the IPO landscape is set to deliver growth and opportunity for companies and investors alike. The convergence of improved conditions for raising capital, a large private equity backlog, pent-up investor demand and the strength of Sweden’s institutional support paves the way for a dynamic period of capital market activity in which private equity firms are forecast to increasingly use the IPO market as a strategic exit route.

Nasdaq Stockholm, in particular, stands ready to capitalise on these trends, offering a reliable and robust platform for both local and international companies to raise capital, primarily due to the following key pull factors:

In summary, after a challenging period of reduced IPO activity in Europe, several clear signs of recovery are emerging in 2024. The combination of pent-up private equity demand, improved macroeconomic conditions and increased investor appetite is driving a resurgence in the IPO landscape. Sweden, with its robust capital markets infrastructure, strong institutional support and favourable regulatory environment, is particularly well positioned to lead the Nordic IPO revival. The renewed issuance of IPO mandates, coupled with a favourable interest rate environment, are clear indicators that Sweden will play a key role in the resurgence of the European IPO market in the coming years.