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Estonian neighbouring countries M&A market in 2016

Finland

In 2015 fourth quarter the Finnish economy reached in again into growing stage after four years of decline. According to the Finnish central bank forecast the 2016 GDP growth is expected to be 1.1% and for the years 2017 and 2018 the expected growth is between 1-1.1%. According to the experts the main economic growth driver was internal consumption and low deposits interest rates, which increased consumer’s investments into durable goods. Translink Corporate Finance Oy partner Mikko Katarmo noted that the Finnish M&A market increased 7% in 2016 nine months y-on-y comprising and totalling 5.8B€ in deal values. The investor’s interest is expected to be in construction companies, where the new building permit acquisition is in increasing trend. Finnish investors are also looking towards Estonia to find synergy opportunities.

Russia

According to Investment Agency OÜ analyst Aleksei Vorobjov the Russian economy is still reliant to oil and gas sector. Approximately 30% of the government budget comes from oil and gas product sales. In 2016 the average oil price was around 30 USD and today is close to 50 USD per barrel. The increase in oil price increased Russian stock index by 40%. But even with the increase in oil price the 2016 Russian economy is still be in decreasing trend.

In the M&A market in 2016 the total number of transactions fell 10% y-on-y comparison. The total volume of was around 15.5 B USD, out of which 56% was in construction and real estate sector, 14% in retail and 14% in mining sector. The notable decrease was in oil sector which was the lowest in last seven years. The number of transaction and price level increased in agriculture sector, which was influenced by the sanctions, rubble devaluating and governmental subsidizing.

Latvia

In 2016 the economic growth slowed down and the Latvian Central bank lowered the growth prognosis from 2% to 1.4%. The main reason for the slowdown has been EU funding decreasing in 2016. In the M&A sector there are good news. According to Prudentia associate Ivars Pikulins there was 38 transactions compared to 31 in 2015 in the same period. The biggest increase was in manufacturing sector where Food Union acquired ice cream production factories in Isbjorn Norway and ALPIN57LUX in Romania. Latvian biggest pharmaceutical acquired three production units in Latvia and Belorussia. In the retail sector the biggest deal was done by TOP chain that purchased company with 30 shops. In retail sector they are expecting to see cross border transactions in Baltics. The biggest deals in commercial real estate were Riga Plaza with deal value 93.4M€, Domina 74.5M€ and Atrium Azur 12.5M€.

The biggest deal in Latvia in 2016 might be considered the fund raising for national aviation company Air Baltic. That deal was closed in the 2016 spring, totalling 132M€ capital raised and the biggest investor was Ralf-Dieter Montag-Girmes. That closing ended the Prudentia five year long participation in Air Baltic process where company was saved from the potential insolvency.

To find out more about what is going on the Finnish, Latvian and Russian market and what kind of interest those countries investors might have, please come and listen on a seminar taking place on 27th of October „How to sell you life’s work“ organized by Investment Agency and Chamber of Commerce in Estonia.

See you on the seminar!
Illar Kaasik, Investment Agency OÜ partner