M&A and private capital market in the Baltic countries – Estonia has been hit the hardest by the crisis, while Lithuania has a record deal value, says Eva Berlaus, managing partner of Sorainen’s Latvian office, sworn attorney.
After a booming 2021, the Baltic M&A market unsurprisingly slowed in both deal volume and value in 2022, driven by the global economic downturn, the energy crisis, rising interest rates and geopolitical tensions fueled by Russia’s war in Ukraine. Fortunately, the sanctions against Russia have had little impact on transactions and business in the Baltic States.
The number of announced deals in the Baltics has fallen by 16% in 2022 compared to 2021, while deal values have fallen by 7%, driven by lower deal values in Estonia, according to global M&A research tool Mergermarket. However, all numbers were well above pre-pandemic levels and are expected to remain so. In 2023, we predict that the renewable energy, defense and medical industries will flourish and drive the M&A deal market. In addition, ESG considerations in M&A transactions are increasing.
The Lithuanian transaction market continues to occupy a leading position in terms of the number of transactions, while Estonia consistently shows the highest transaction values
In 2022, the Estonian M&A transaction market has clearly suffered the biggest blow from all the Baltic countries, both in terms of the number and value of transactions, compared to 2021. In both Latvia and Lithuania, there was a slight decrease in the number of large M&A transactions in 2022 compared to 2021, but transaction values increased, reaching a slightly higher level in Latvia, while in Lithuania it jumped by as much as 65.1%, reaching a new record as a result. However, Estonia’s open transaction values still leave its neighbors far behind. The main reason for this is huge capital raising.
The TMT and energy sectors continue to be at the forefront
TMT and the energy sector were clearly the main drivers of the Baltic M&A market in 2022, and the shares of both sectors in the total M&A transaction sector increased compared to 2021. Transaction activity also increased in the medical and financial services sectors, while the real estate and construction and services sectors slowed.
Startups have taken half or more of the top 10 Baltic deals by open value three years in a row
Fund raising rounds in the technology sector continue to dominate Baltic deals. In early 2021, Bolt Technology announced the largest ever fundraising round in the Baltics (EUR 628 million), followed by large capital rounds by Veriff and Nordsec, leading to both reaching unicorn status (valuation over USD 1 billion). However, the downturn has taken its toll on the global tech stock market. Although Estonia’s startup sector attracted the largest amount of capital ever (a total of EUR 1.4 billion), most of it (around EUR 1 billion) was raised in the first quarter of the year.
Fund raising activity was more evenly distributed in Latvia and Lithuania. Among other significant transactions, Blackstone made an additional investment in Luminor banka and bought out the remaining bank shares of Nordea, while Invalda INVL and Šiaulių bankas signed a deal to merge their retail companies. The energy sector continued to be active, with Ignitis acquiring large solar energy projects in Lithuania, while Sunly Mirova raised EUR 200 million in the round. At the end of 2022, Maag Grupp announced the acquisition of HKScan’s Baltic companies.
Start-ups companies are marked with *
Latvia: While the value level of the largest M&A transactions remained unchanged, the number of such transactions decreased by 24%
The number of large M&A deals in 2022 decreased by 24% compared to 2021 (from 25 deals in 2021 to 19 deals in 2022), but deal activity still exceeds the level of 2020 and some previous years.
The level of large M&A deal values remained flat when comparing 2021 to 2022, but looking back at previous years, deal value has been much lower in recent years (see previous graphs).
Looking more broadly at the deal scene (not just the larger deals reported by Mergermarket), mainly due to the Ukraine war and the resulting increased geographic risk, 2022 has been a year of deals with lower average values and investors coming more from the Baltics or nearby regions (Central and Eastern Europe, Nordic countries) where there is more information and understanding of the mentioned geographic risk. In terms of sectors, energy has been the leader so far.
Baltic M&A and Private Equity Forum 2023 – Riga, this April!
A well-known event for participants of the Baltic transaction market, which gathers 200+ participants every year. Join PE and VC funds, investment bankers, lawyers, consultants, CEOs and shareholders to get the latest market information.
The program offers:
• Market prospects. Private markets – what to expect in 2023 and beyond?
• What drives the Baltic private equity market and where is it headed? Cornerstone investors of Baltic PE funds survey the market.
• Eko Baltia’s success story: from local player to regional champion.
• Exciting panels on deals in the Baltic energy, healthcare and defense industries
• Reconstruction of Ukraine with the help of private investors
Register now: https://konferences.db.lv/conferences/the-baltic-ma-and-private-equity-forum-2023/#registration
Source: Mergermarket
