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Overview of M&A activity

In 2021, the covid-19 pandemic has affected the Icelandic economy in many areas. However, as Iceland was one of the first countries to launch a coronavirus tracing app and because it created a capable landscape of test centres and infection-tracing teams, Iceland has coped with the pandemic in a remarkable way with very few casualties. However, the pandemic has also shown that Iceland's economy is closely linked to the markets in Europe and North America. Therefore, the tourism sector, which had greatly helped the Icelandic economy after the financial crisis of 2008, has faced difficult times since the outbreak of the pandemic. Even in these difficult times, however, there are already many positive signs.

Íslandsbanki, which has been owned by the Icelandic government since the financial crisis, was publicly listed on 21 June 2021 and the issue of 35 per cent of the overall capital in the bank was oversubscribed nine times by financial investors and individuals. Among the larger shareholders is even a sovereign wealth fund from Abu Dhabi with a shareholding of about 1 per cent. The proceeds from the sale amount to 55 billion kronur. This initial public offering (IPO) was a long awaited step in the Icelandic state's privatisation of their holdings in the Icelandic banks. Currently, only Landsbankinn is still state-owned and it is still being discussed whether the Icelandic state shall now also start to privatise its last large shareholding in a commercial bank.

The new airline Play started operations this spring and the company's successful IPO was on 9 July 2021. The issue was oversubscribed eight times. The other Icelandic airlines are slowly recovering from the restrictions during the pandemic; Icelandair has secured the financing for its new planes and Air Atlanta now operates as a cargo airline only, adding seven Boeing 747 and Airbus A340 aircraft to its existing fleet of nine Boeing 747 freighters.

Despite the pandemic, there has been considerable M&A activity during the past year. In February 2021, funds advised by Goldman Sachs acquired the majority in the software company Advania together with the management and the Danish financial investor VIA Equity. Advania's turnover has grown by 20 per cent per year for the last five years. In August 2021, Advania acquired the majority in the Norwegian information technology company Visolit, which had itself purchased several smaller competitors in the past. The merger is still subject to merger control clearance but is planned to take effect before the end of 2021. After this merger, more than 2,500 employees will work for the combined company.

Other notable mergers include the takeover of Kvika banki by the shareholders of insurance company TM which was subsequently integrated into Kvika together with the leasing company Lykill fjármögnun, which was purchased in the beginning of 2020.

There was also some public M&A after a successful takeover bid for Skeljungur (Shell Iceland) by the investment company Strengur. Following the takeover, there were plans for a delisting or the change into the First North segment of the stock exchange. The takeover bid was financed by Kvika banki and by the US investment firm Taconic Capital.

There were also transactions regarding stakes in Iceland's iconic Blue Lagoon as two investors sold their shareholdings in the thermal spa to the investment company Stoðir and to an investment vehicle of 14 Icelandic pension funds. In these transactions, the Blue Lagoon was valued at around €400 million.

As in previous years, the publicly listed real estate companies Reginn, Reitir, Eik and Heimavellir have again strengthened their property portfolios.

There is still an ongoing debate regarding the renewal and improvement of the country's infrastructure. Because hydropower and geothermal energy make up the largest portion of the energy market, it has taken some time to set up Iceland's first wind farms; however, there are now a number of projects around the island. Also, several harbours are being extended, and there are promising signs regarding the Finnafjord Port Project in North East Iceland, a joint effort between German port operator Bremenports and several public bodies in Iceland.

Such infrastructure investment could create opportunities for international and domestic investors alike. Several Icelandic pension funds have thus set up an infrastructure investment fund that aims at financing infrastructure projects in public–private partnerships.