The Technology M&A Review: Sweden


Sweden has experienced an increase in M&A technology transactions, especially within highly regulated sectors such as fintech and telecoms, which is partly a consequence of the thriving startup scene producing a consistent stream of innovative new players, which inevitably attract the interest of more established Swedish and international businesses.

We expect to see a boost in activity and a rise in the number of M&A transactions in software, e-industries such as e-commerce, e-pay, e-learning, e-gaming and e-health as well as data-rich industries, including data centres, data and cyber security, virtual conferences, data analytics and logistics. New approaches and actions adopted within and post the global pandemic will accelerate these markets resulting in more M&A transactions.

Year in review

In June 2020, Evolution Gaming Group AB, a Sweden-based and listed video-streamed live dealer gaming operator agreed to acquire NetEnt AB, a Sweden-based and listed developer and licenser of gaming systems. The transaction valued NetEnt at more than €2 billion. The transaction was structured as a recommended public offer under Sweden's applicable laws and regulations. The combined company will become a leading online gaming provider with a strong platform for international growth and expansion, both organic and through additional acquisitions.

In July 2020, EQT VIII and EQT IX funds managed by EQT, alongside TA Associates agreed to acquire IFS, a Swedish enterprise software provider, from EQT VII, another fund managed by EQT. The transaction valued IFS at more than €3 billion. EQT funds and TA Associates will support the company with continued investments in the organisation and product capabilities, both organically and through add-on acquisitions. The transaction was subject to customary regulatory approvals and was closed at the end of August 2020.

Legal and regulatory framework

Sweden has the following laws and regulations that govern the behaviour of buyers and sellers within the Swedish technology M&A market:

  1. the Swedish Companies Act, which regulates all the general rules in the creation and functioning of companies;
  2. the Swedish Competition Act, which sets the Swedish legal groundwork for the protection of competition including merger control;
  3. the Income Tax Act on all tax-related legislation regarding Swedish limited liability companies;
  4. the Employment Protection Act concerning salaried employees' legal position in an acquisition; and
  5. the Copyright Act, Patents Act and Trademark Act on the protection of intellectual property rights.

Furthermore, the respective laws and regulations of the European Union also directly or indirectly apply within the Swedish legal system, and as such impact the legal and regulatory framework of the Swedish technology M&A market.

There are limited types of activities that require separate permits and licences that must be obtained from the Swedish authorities, such as financial services, insurance brokers, gambling providers etc. Therefore, certain regulatory requirements in the finance and insurance sector do impact on the technology sector in terms of licences and permits required for the conduction of the business.

Key transactional issues

i Company structures

Business activity in Sweden can be conducted by individuals through an individual enterprise or by several individuals as a partnership. However, the liability for these types of business activities comes with a personal liability for the individuals involved and therefore most business activity in Sweden is conducted through limited liability companies by way of a public limited liability company, or a private limited liability company, where the shareholders' liability is limited to the amount invested in the company.

The limited liability company is also the company form that most often constitutes a target in a Swedish M&A transaction in the Swedish market.

The establishment of a public limited liability company requires a minimum capital of 500,000 kronor, which must be paid in cash. A public limited company must have a board of directors consisting of at least three board members. One of the members must be appointed chairman. A managing director must also be appointed.

The establishment of a private limited liability company, on the other hand, requires a minimum capital of 25,000 kronor, thereby making it a more used corporate vehicle for entrepreneurs and startups because of the lower share capital requirement. A private limited liability company may have a board of directors with one or more members and a managing director.

ii Deal structures

The deal structure in M&A transactions in Sweden is typically made up of a share purchase or an asset purchase, whereas the share purchase is the most common deal type in the Swedish technology M&A market.

The volume of M&A transactions regarding listed companies is somewhat low. Insofar as a listed company is to be acquired, obligatory capital market rules apply (e.g., local marketplace rules, takeover rules and EU capital markets regulations).

The involvement and roles of advisers in M&A transactions on the Swedish market largely depend on the size and nature of the transaction and the characteristics of the target. Larger transactions often engage a diversified set of advisers, including investment bankers, who usually lead the process and coordinate the work of the advisers responsible for respective subject matters (e.g., legal, tax, financial, environment, etc.). On the other hand, in smaller transactions legal advisers are at times the only advisers who coordinate the process.

iii Acquisition agreement terms

The most important documents governing a Swedish technology transaction are:

  1. letter of intent – a short-term sheet document in which the parties agree to the main terms of the proposed transaction, including but not limited to purchase price, purchase price regulation, specific assets or post-closing covenants, as non-competition clauses;
  2. share purchase agreement – in the case of an acquisition of all shares;
  3. business transfer agreement – in the case of an acquisition of assets;
  4. investment agreement – in case of injection of new capital into target; and
  5. shareholders' agreement – in the case of partial acquisition or investment of shares.

The key provisions in a typical share purchase agreement and business transfer agreement in a Swedish private M&A transaction customarily have the following features.

Purchase price

Price is usually the foremost issue for both parties in a corporate acquisition. In addition to agreeing the headline amount that will be paid for the target shares or business assets, the parties will also need to consider and document in the acquisition agreement a number of related issues, including the following:

  1. how the price will be satisfied and the form of consideration payable;
  2. whether the price will be a fixed sum or subject to a price adjustment mechanism;
  3. when the price will be paid including, in particular, whether payment is to be made in full at completion of the transaction or, if it will be deferred to a later time;
  4. if the price will not be paid in full at completion, whether:
  5. the seller requires any security for the buyer's payment obligations; and
  6. the buyer expects to be able to set-off any warranty or indemnity claims against the deferred element of the consideration.

The main two types of consideration payable in respect of a corporate acquisition are:

  1. cash consideration: this is the most common and most straightforward form of consideration, where the buyer usually pays a fixed cash sum to the seller in full on completion of the transaction; and
  2. non-cash consideration: the most common forms of non-cash consideration are:
    • the allotment and issue of shares in the capital of the buyer to the seller; and
    • the issue of buyer loan notes to the seller.

In most M&A transactions, the purchase price is typically determined in relation to a target's most recent financial statements. Purchase price adjustments generally shield a purchaser from changes in the value of the target between the date the target was valued and the transaction closing. In this respect, the purchaser and seller must agree on a valuation method and have adopted accounting policies that are similar or that can be reconciled. Purchase price will be in either cash or shares (or a split of these two assets). In the majority of cases, consideration is 100 per cent cash.

Representations, warranties and specific indemnities

Representations and warranties are given by both parties to disclose material information to each other. The scope of representations and warranties largely depends on the character and negotiation position of the parties. While representations and warranties typically cover the whole range of the target's business activity, the level of their thoroughness differs depending on the transaction and is often higher in the case of strategic sellers as compared to PE sellers. In transactions involving PE firms (either on the sell side or the buy side) we see an increasing applicability of W&I insurance; however, these types of insurances are still fairly new to the Swedish M&A market.

Conditions precedent

Conditions precedent, or closing conditions, are stipulations agreed by the parties that must be satisfied, or waived, before the acquisition may close. Conditions precedent must be drafted with care. They are typically specific to a transaction and the needs and circumstances of the parties. Conditions precedent typically found in share purchase agreements (SPAs), among others, are:

  1. approvals: both parties shall have received all relevant regulatory and other governmental approvals in relation to the transaction from any place with jurisdiction over the subject matter of the SPA;
  2. delivery of documents: each party shall have delivered executed copies of all ancillary documents; and
  3. payment: the purchaser shall have delivered the purchase price to the seller (or escrowee).

Other typical closing conditions involve approval from key customer and suppliers if contractual arrangements contain change of control provisions and new service contracts with the executive managers of target. The buyer may seek to resolve material findings in the legal due diligence by conditioning closing on the remedy of these findings.


Indemnification clauses address liability for losses incurred because of misrepresentations and breach of warranties, covenants and other agreements. The indemnification clause can be drafted as an exclusive remedy or a non-exclusive remedy to assert such claims. Typical indemnification obligations of a seller are, among others, to indemnify the purchaser from breaches of representations and warranties made by the seller and breaches of covenants or other obligations of the seller.

Post-closing covenants

Post-closing covenants apply after a transaction closes and are tailored to the needs of the parties and are contextual. They may, among other things:

  1. ensure the purchaser cooperates with the seller to maintain certain tax and business records (in case of tax or other regulatory audits);
  2. ensure the purchaser maintains directors' and officers' insurance for outgoing directors and officers of the target company;
  3. prevent the seller from competing with the target company; and
  4. prevent the seller from soliciting employees of the target company.

iv Financing

The financing of M&A transactions varies due the type of purchaser. The Swedish Companies Act includes provision hindering the target in participating in self-financing of purchasing its own shares (with certain exceptions), entailing that the purchaser must finance its acquisition by either equity or utilisation of new or existing financing facilities.

v Tax and accounting

Holders of shares not resident in Sweden are normally not subject to Swedish taxation on any gains realised on the sale of shares, irrespective of the ownership period, subject to certain anti-avoidance rules seeking to prevent that taxable dividend payments are converted to tax exempt capital gains. If an investor holds the shares in connection with a trade or business conducted from a permanent establishment in Sweden, gains on shares may be included in the taxable income of such activities.

Further, there are participation exemption rules that apply to investments made by corporate shareholders, which constitute a very favourable holding regime. A tax exemption applies for Swedish corporations (limited liability companies) and European equivalents on capital gains on, and dividends from, shares 'held for business purposes'. Shares in Swedish corporations and participations in partnerships, as well as in foreign companies, can qualify as shares held for business purposes.

Unlisted shares are in principle always regarded as held for business purposes. Listed shares are regarded held for business purposes if the shareholding company holds at least 10 per cent of the voting rights or, in certain situations, if the shares are held in the course of the business. Also, listed shares must be held for a minimum period of one year.

There is, however, an exception from the capital gains tax exemption, which applies on a disposal of shares in a 'shell company'. A shell company is a company or partnership where the fair market value of liquid assets, such as of cash, shares and other marketable instruments (other than shares held for business purposes), and similar assets, exceeds 50 per cent of the consideration paid for the shares. The sale of a shell company results in punitive taxation where the entire consideration, and not just the gain, is taxed. However, the tax can be completely avoided by filing a special tax return for shell companies, which must be done within 60 days of signing or closing.

vi Cross-border issues

Sweden has a very liberal attitude towards foreign investment. Foreign investors are generally treated equally as Swedish investors and are in broad terms able to invest in the same sectors and companies as domestic investors.

IP protection

The Swedish Copyright Act, Patents Act, Trademark Act and Design Protection Act are the primary statutory laws on the protection of intellectual property rights.

In addition to the above, a number of European and international regulations relating to IP protection are also effective in Sweden. At a European level, the IP protection is consistent and harmonised, and Swedish law regarding intellectual property rights is aligned with international regulations.

In a groundbreaking case for copyright holders and internet service providers (ISPs) in Sweden, the Patent and Market Court of Appeal (PMCA) recently declared, for the first time, that dynamic blocking injunctions are in line with Swedish legislation. Unlike regular static blocking injunctions that cover only a specific infringement by a specific infringer, dynamic blocking injunctions also cover other infringements and possibly those by other infringers.

In this case, the PMCA declared that, in order to prevent ISPs from being accomplices to online copyright infringement committed on illegal file-sharing sites by providing internet access to such sites to their customers, ISPs can be ordered to block not only the domain names and web addresses that lead to the illegal file-sharing sites, but also future undefined domain names and web addresses whose main purpose is to provide access to these illegal file-sharing sites.

Employment issues

In Sweden, the use of non-competition restriction is governed by Section 38 of the Swedish Contracts Act and two collective bargaining agreements entered into in 1969 and 2015 (the Agreements). The latter agreement has replaced the collective bargaining agreement from 1969. The Agreements cover a large part of the Swedish labour market and even though not all Swedish employers are directly bound to apply the Agreements, the Agreements have a normative effect and the Swedish Labour Court has historically found guidance in the Agreements when assessing whether a non-competition restriction is 'reasonable'.

A non-competition restriction must be 'reasonable' in order to be enforceable. When assessing if it is reasonable, the courts take into account, inter alia, the scope of the restriction (both geographic scope and its definition of what constitutes a competitive business), the duration of the restriction, the employee's position and access to trade secrets and the risk of damage if trade secrets are used in a competitive business. In short, the employer must have a legitimate interest to protect its trade secrets which outweighs the employee's interest in being free to pursue his or her profession.

Based on case law and the Agreements, it is customary to agree on a restricted period of between nine and 12 months. According to the agreement from 2015, the duration should not exceed 18 months unless special circumstance exists. Further, compensation during the restricted period is, as a general rule, mandatory. According to the agreement from 2015, the compensation shall amount to the difference between the employee's average monthly income and the lower monthly income the employee is receiving or could have received from a new employer, however, capped at 60 per cent. A top executive (who is not protected under mandatory Employment Protection Act) is not covered by the Agreements and there may be further possibility to deviate from the provision in the Agreements in in relation to such an employee.

There are no statutory rules on non-solicitation restrictions preventing solicitation of customers or poaching of employees and there is no compensation requirement to enforce such restrictions. Nevertheless, such restrictions cannot be used arbitrarily. Recent case law also indicates the restricted period should be reasonable and based on the employer's need of protection.

Works for hire does not exist in Sweden, except for patentable inventions and computer programs. Based on the Act on the Rights to Employee Inventions and the collective bargaining agreement regarding the right to employee's inventions, an employer has a preferential right to acquire a patentable invention, depending on how closely related the invention is to the employer's business and on whether the invention has been developed within the scope of the employee's duties. Fair compensation is mandatory if an invention is acquired by the employer. Computer programs are irrevocably assigned from the employee to the employer.

Other types of intellectual property rights such design rights and copyright will, as a generally rule, be assumed by the employer with a limited right of use, provided that such rights have been developed as part of the employee's normal work duties. However, in order to ensure full ownership and right of use, it is advisable to enter into a separate intellectual property rights agreement, including a right for the employer to further develop, amend, and to licence and transfer the rights. In a transactional context, it is important to ensure that such agreement exists prior to signing of the transactional documents.

A duty of confidentiality exists during the employment relationship, but to protect the employer after the termination of employment, an explicit confidentiality restriction is needed. There are, however, limits on how trade secrets may be used or disclosed in the Swedish Act on Trade Secrets.

To ensure effective enforcement of a non-competition restriction, a non-solicitation restriction and confidentiality restrictions, a liquidated damages clause is advisable as otherwise the employer would need to establish the size of the actual damage in case of a breach, which is difficult and may render the restrictions rather ineffective. The liquidated damages are regarded reasonable if capped at six months' salary.

Lastly, litigation with employees is not especially common but in technology intensive sectors it is increasingly common with disputes pertaining to unlawful use of trade secrets and competing activities.

Data protection

Transactions and due diligence in Sweden will entail obligations for the parties established or operating in the EU involved (the target, buyer, seller and all the advisers participating) and they will be governed by regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (GDPR) and the Swedish Data Protection Act.2 The Swedish Data Protection Authority has not addressed the question of personal data processing in connection with M&A transactions.

In connection with the due diligence of the target in which the purchaser or its advisers reviews the legal documentation of the target, the reviewers will typically access documentation in the data room that contains personal data (e.g., of the target's customers or employees). Disclosure of information in connection with a purchaser's due diligence must have a legal basis according to the applicable personal data legislation. The general principles in the GDPR should be taken into account (e.g., the principle of data minimisation). Access to personal data should be restricted to what is necessary, and it should be considered whether the information should be anonymised (especially when it concerns special categories of data or other sensitive data such as social security numbers).

Disclosure of personal data to a buyer (or its advisers) based in countries outside the European Union will be deemed to be a transfer of personal data to a third country, which generally requires additional security measures or mechanisms for the transfer to be compliant. Such measures and mechanisms will depend on the country to which the data is transferred.

Regarding the transaction itself, transactions involving shares or a complete transfer of the totality of a company's assets are in most cases deemed a 'succession' and as such a disclosure has not occurred (however, the due diligence disclosure may still have occurred). Partial sales of a company's assets, including personal information (such as registers of customers and employees) may be deemed as a disclosure of personal information and thereby would require due and proper consent from the relevant person unless based on another legal basis.


Technology startups, in the most cases, utilise the possibility of subsidies. These subsidies will typically be granted to projects that the subsidy provider finds innovative and new. These subsidies are earmarked to salaries for developers and other similar costs.

Typically, these subsidies do not entail any commercial restrictions on utilisation or future exits.

Due diligence

The purchaser will in most cases require a legal due diligence conducted by its legal advisers. In some instances, we do see that the seller's legal representatives outline a red flag vendor due diligence report to attract potential purchasers.

The due diligence comprises of three stages: (1) retrieval of information; (2) review; and (3) outlining the due diligence report.

The retrieval of information includes the building of a virtual data room (often based on the purchaser's request list), searching on public registers, online request in the data room and 'live' Q&A meeting with the seller, target's management and other key personnel.

The due diligence report may be limited to only contain red flags (i.e., findings that have material impact on the feasibility of the proposed transactions).

Legal due diligence in M&A technology transactions should focus on title and rights including intellectual property rights. Further, we experience that data in the context of GDPR has become increasingly important. Both with respect to title, rights and data, we often experience that additional information or Q&A sessions are needed to obtain the necessary in-depth knowledge to assess those matters. The purchaser as well as the purchaser's advisers shall obtain from the management and inventors' information on intellectual property assets within the company, how these are protected and what measures have been implemented to ensure that target's use of intellectual property does not infringe other person's intellectual property rights.

Specific focus should be on the agreements on which the target acquired or uses intellectual property and proper registration of all key intellectual property in the relevant registers. Pending and threatening litigation with respect to intellectual property is an additional area of concern. Where a technology due diligence assessment has been performed, it tends to be beneficial to cooperate with the technology due diligence team on certain aspects.

The increased activity on regulating the technology industry calls for an increased focus on the due diligence of the general compliance of the target and especially on the specific industry-related regulations.

Dispute resolution

Documents governing M&A transactions in Sweden market usually provide that disputes are to be resolved through arbitration. Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings such as:

  1. when the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed;
  2. arbitration is often a quick and efficient way to resolve a dispute;
  3. arbitration can be cheaper and more flexible for businesses;
  4. arbitral proceedings and an arbitral award are generally non-public, and can be made confidential;
  5. because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other jurisdictions as opposed to court judgments; and
  6. there are very limited avenues for appeal of an arbitral award.

Arbitration in Sweden may be conducted both as an ad hoc or institutional arbitration, depending on the arbitration clause. Institutional arbitration under the rules of the Arbitration Institute of the Stockholm Chamber of Commerce3 is normally preferred in M&A transactions.

Sweden is a party to the New York convention and hence, foreign arbitration awards rendered in a country that has signed this convention are, as a general rule, recognised and enforceable in Sweden. By contrast, a judgment rendered by an ordinary foreign court will not automatically be recognised and enforced in Sweden.


As in other jurisdictions, the consequence of the covid-19 outbreak in the spring of 2020 in Sweden are not fully developed or understood at the time of writing.

From a major fall in M&A activity in the first months of the covid-19 outbreak in Sweden, the market seems to have stabilised. Even though transactions may either be cancelled or postponed in the current covid-19 environment, we see high levels of investor confidence, a constant stream of innovation, relatively cheap capital, rapidly developing supporting technologies and a strong push to create earnings growth through acquisitions. Hence, we expect technology M&A to continue to boom going into 2021.

The continued development of European Union regulation within the technology sector is a driver for business opportunities for new and existing technology companies, but also within the legal services revolving around M&A, including but not limited to a larger focus on regulatory due diligence and reviewing the compliance of such regulation (e.g., GDPR).

M&A-related contracts will adapt very quickly to the new circumstances post covid-19. Rising risks mean that buyers have an increased need for security. We believe that the relevance of material adverse change (MAC and MAE) clauses in M&A contracts will increase and covid- 19 will serve as an example in future negotiations.

Due diligence should also review technology companies' terms and conditions with regard to the possibility to postpone deliverance because of pandemics. We see terms and conditions' provision regarding force majeur (or 'acts of god') that would not include the covid-19 pandemic. Being a highly relevant force majeure, the legal due diligence should ensure that the target's material contracts contain appropriate provisions protecting the target in case of further outbreaks.


1 Victor Stålblad is a senior counsel, Ahmed Al-Rahma, Lucas Magnusson and Karin Tukiainen are associates at Bird & Bird Advokat KB.

2 Sw. dataskyddslagen, 2018:218.

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