To date, 2018 was a record year by the number of transactions announced in the Baltics (74 in 2018, 37% more than in 2017, with 53; see table below) and the No. 2 year to date by total disclosed value: EUR 2.384 billion in 2018, just slightly lower than the 2008 figure of EUR 2.521 billion. If we add another major transaction in Estonia – European Diversified Infrastructure Fund II’s acquisition of Estonian district heating company OÜ Utilitas (where the value was not published, but experts estimate it at around EUR 300 million), then 2018 would also be a record year by disclosed value.
Changes in the number of Baltic M&A transactions in 2015-2018 according to Mergermarket statistics (see below):
Estonia clearly leads the Baltic market by both number (for the third year in a row) and also total value of deals. The Blackstone/Luminor transaction has somewhat inflated the Estonian numbers and if its value is distributed proportionately among the three countries (based on asset values in Estonia, Latvia and Lithuania), the total value in Estonia would be EUR 1.226 billion, Latvia – EUR 705 million and Lithuania – EUR 453 million.
TOP 10 M&A transactions
by disclosed sale price in the Baltics (Lithuania, Latvia and Estonia) 2018
As can be seen from the Top 10 deals table, the majority of investors are foreign (from outside the Baltics) and among the Top 5 deals as many as four involved pan-Baltic target companies. Growing deal values show that the Baltic market is maturing and that Baltic companies are growing in size and continue consolidating across the Baltic States.
This summary has been prepared on the basis of information in the Mergermarket transaction database and publicly available data.
Private equity players are increasingly active. In 2018 at least 14 of the 74 announced deals involved PE funds on the buy side or sell side (see the enclosed list). PE activity is likely to increase even further as a number of new private equity and venture capital funds have been launched. Only in 2018 seven new VC funds were launched in Lithuania (including Practica Venture Capital II, which will invest across all three Baltic States) with a total size of EUR 136 million. Invalda INVL launched its INVL Baltic Sea Growth Fund and BaltCap increased its BaltCap Infrastructure Fund to 100 million EUR, also announcing that it will establish JB Nordic Ventures, a 50/50 joint venture between BaltCap and Japananese JBIC IG, to invest in the Baltic and Nordic region.
In some way 2018 looks similar to 2008 – many high-value deals during the peak of the economic cycle. But this does not necessarily mean that 2019 will be worse. With intensifying activities by PE and VC funds, we might see even more deals, especially of smaller size. At the same time buyers are becoming noticeably more cautious and we have already seen decreasing M&A activity in Europe and worldwide during recent quarters.