Analytics, Baltic, Good for Business, Investments, Markets and Companies, Mergers and take-overs

Despite muted global economic growth, 2019 proved to be the second-best year for deal-making in the region since the credit crunch, with 65 deals worth 1.04 bn euros -- a tally beaten only by 2018, with 76 transactions totaling 2.8 bn euros, it appears from the analysis.

Estonia saw the highest number of deals for the fourth straight year, accounting for 42% of transactions across the region, although last year Lithuania did run Estonia a close second. Prominent recent deals in Estonia include the biggest single transaction of 2019 across the Baltic countries: the 410 mln euro acquisition by Estonian bank LHV Pank of Danske Bank's private loans unit.

"The last two years have been exceptionally successful in the Estonian transaction market: we have seen huge volume growth and many more transactions than we were used to seeing in the past," Sven Papp, Ellex Raidla partner and head of M&A and corporate practice, said in a press release.

"However, future trends are difficult to outline, as single large transactions can have a significant impact on transaction volumes in Estonia and the other Baltic countries. Estonia also runs the risk of being 'the victim of its own success' because in a small country with a limited number of high-value assets, such assets may at one point simply run out," Papp said.

The number of deals in Latvia fell from 19 in 2018 to 12 in 2019. This was at the lower end of the range for recent years. However, total disclosed deal value was, at 345 mln euros, the third highest in recent times because of one very large deal: the 340 mln euro purchase by Germany's Schwenk Zement of the Baltic and Nordic assets of Mexico's building materials company Cemex. 

Lithuania was the only Baltic state to see an increase in the number of deals in 2019 -- up by one to 26. Deal value also increased six-fold to 278 mln euros, largely because of the 128 mln euro investment in online vintage fashion marketplace Vinted by a group of venture capital investors.

The region continued to see a healthy pace of smaller M&A deals in tech companies, with technology, media and telecoms (TMT) accounting for more transactions than any other sector in 2018-2019.  Many of the TMT M&A deals in the Baltic states this year were small. As a result, they accounted for only 9% of the total value of M&A deals in 2018-2019. Financial services deals accounted for 38% of M&A value in the Baltics in 2018-2019, the highest of any sector, though the sector only made up 7% of overall volume during the same period. 

The report said that even though economic growth is expected to cool in 2020 in all three Baltic states, there are reasons for optimist -- considering the investments of major international investment funds such as Apax and Blackstone, the Baltic outlook remains strong, with continued strong economies in the region.