COBALT is one of the leading M&A legal advisors in CEE during the first half of 2022

COBALT is recognized as one of the leading M&A legal advisors in the CEE region by the number of advised deals in the first half of 2022, according to Global Mid-Market M&A insight review presented by Refinitiv.

According to the agency, during the period from January to July 2022 COBALT in Lithuania, Latvia and Estonia advised on a total of 16 deals.

In the rankings COBALT stands among such leaders in the international legal services market as Allen & Overy, CMS, Dentons, Baker Mckenzie, to mention just a few.

Refinitiv Deals Content is the most extensive and flexible resource available for timely M&A and Capital Markets transactions insight and analytics, relied upon by the financial press and deal makers around the world. Refinitiv leading-edge products for the deal making community enable companies to analyze the current trends in the market and assess the changing competitive landscape by building your own custom league tables and reports.

Global transaction market trends

According to the Refinitiv review, Global mid-market M&A deals valued up to US$500 million (including undisclosed value deals), reached US$571.2 billion during the first half of 2022, a decrease of 15% compared to year-ago levels and the slowest opening six-month period for mid-market M&A since 2020. Mid-market transactions during the second quarter decreased 8% compared to the first quarter of this year. By number of deals, mid-market deal making reached nearly 26,600 deals during the first half of 2022, a 15% decrease compared to a year ago and a two-year low.

Worldwide small-cap M&A deals valued up to US$50 million (including undisclosed value deals) reached US$101.4 billion during the first half of 2022, a decrease of 20% compared to a year ago and the slowest first half for small-cap M&A since 2020.

Baltic transaction market trends

Estonia

COBALT Estonia Managing Associate Jesse Kivisaari presents transaction market trends in Estonia.

After the record-breaking year 2021, the transaction market in Estonia continued generally strong during Q1/2022, although with a slight downward correction to previous years’ volumes following a general European wide market effect.

The transaction market has been very versatile and seen a fair mix of sales of highly valued businesses or assets with large bidding rounds organized as auctions, privately negotiated deals with strategic investors looking for greater synergy advantages or new market positions and businesses that are sold with a clear discount due to changed market conditions on specific business sectors, especially in certain retail or wholesale markets.

During the first half of this year, transactions could be seen focused continuously on start-ups and the IT-sector on a more general level, and therein investment rounds can be seen as increasingly coupled with exit possibilities also based on private M&A transactions as an alternative to the IPO-tracks. Fintech as a point of interest can be singled out with transactions such as the sale of Maksekeskus to Luminor Bank.

The current geopolitical situation and European heat waves have acted as an increasing motivator for the renewable energy sector transactions, which have been active along with the whole energy sector boosted further by covid related effects on energy use.

The health-care sector and real estate market have also been active during the last 6 months, wherein as an example Viru Keemia Grupp bought Stockmann department stores in Estonia and Latvia for 87 MEUR. The real estate market has also clearly acted as an attractive investment opportunity for local investors that have been able to materialize on their prior investment within the last few years from other business sectors.

Investors have window-shopped more prior to making investment decisions. Nevertheless, the market is full of equity looking for a place to be invested, whether it be due to sale of prior investments by local entrepreneurs, investors or institutional investors that have been able to attract considerable funds under their management. Only last year six new investment funds were established in Estonia raising close to 300 MEUR and in the end of last year it has been valued that local funds have free capital to be invested in the range of some 800 MEUR. This means that when valuations of companies better match the future prospects, i.e. a correction in general valuations on the market and/or more clarity on the future market developments emerges, the transaction market will surely see a boost from the level we could see during the last 6 months.

Latvia

COBALT Latvia Partner Guntars Zīle presents transaction market trends in Latvia.

The first half of 2022 has not (yet) yielded such high profile deals as seen in 2021 (like Printful becoming the first Latvian “unicorn”) but there has been a steady trickle of transactions following the larger wave of 2021.

A very dynamic start of the year fuelled by 2021 optimism and “post-Covid-19” sentiment was followed by a complete but short standstill triggered by Russia’s invasion into Ukraine on 24^th February, and although most of the transactions continued after a while, a number of deals fell apart and the overall pace of many projects significantly slowed down as both local businesses and investors tried to grasp rapidly changing global and regional implications of Ukraine war and to assess the impact of massive sanctions imposed on Russia and Belorussia on local businesses.

The shift in energy markets has opened new opportunities and a fresh perspective on renewables projects resulting in a steep rise in investment activity for both wind and solar energy projects in Latvia, as well as overall across the Baltics. Investors such as Ignitis Group, Taaleri Energia and Utilitas have been very active in consolidating wind energy projects in Latvia while incumbent energy company Latvenergo has launched large scale joint venture with state forest company aimed to develop wind energy projects.

The deals so far published this year show activity across various sectors and industries. Predictably, IT and TMT sectors continue to be among the most active, same as B2B services (BaltCap’s sale of Vendon to Azkoyen, sale of TVG to Pax8, Tet’s acquisition of Telia Latvia, BaltCap’s sale of Uprent to Renta Group, acquisition of Nordigen by GoCardless). Energy and real estate transactions are plentiful (BaltCap Infrastructure Fund’s sale of Energia Verde to Gren, acquisition of Stockmann trade centres in Riga and Tallinn by Viru Keemia Group, acquisition by Hili Properties of trade centre in Riga, acquisition by Baltic Green Fund of significant forest portfolio etc.). The recent merger of Signet Bank with Expobank shows some further consolidation in the financial services sector in Latvia and there is also continuous interest in healthcare businesses (as shown by the acquisition by Syneos Health of local clinical research service provider AmberCRO).

Activity on public markets has been sluggish, this year so far has produced only one new IPO on Riga Stock Exchange, a local pension management company INDEXO, but some more might be on the way. Meanwhile, VC investments into Latvian start-ups are on the wave, particular activity visible in the field of foreign VC players (both funds and angel investors) investing in Latvian targets.

The resilience of the transactions market and trust of investors in our region has proved remarkable, despite the Ukraine war and mounting global challenges the deal flow, although at a much calmer pace, continues and remains promising for the second half of the year. The extensive liquidity of private equity and venture capital players and highly competitive environment with relatively scarce targets still is one of the key factors contributing to overall deal activity and business valuations.

Lithuania

COBALT Lithuania Partner Dr Juozas Rimas presents the main trends of the transaction market in the first half of 2022.

As the main trends of the transaction market in the first half of 2022, the boom of startups and the changes in their valuations, the undiminished confidence of foreign investors despite the geopolitical situation, and the ongoing consolidation of the health care and renewable energy sectors can be singled out.

In the ongoing negotiations for venture capital deals, valuationscan be seen falling. This corresponds to a trend on a global scale (a clear example of this is the case of Klarna). However, it is not clear from public information at which financing stage this trend is more pronounced: in Lithuania, it is observed in some smaller transactions, when startups that have not yet gained “weight” in the market seek to attract financing. Market leaders recorded record amounts in the first half of the year, for example Vercom, listed on the Warsaw Stock Exchange, acquired the e-mail marketing platform MailerLite for EUR 84 million, and the payment platform kevin. raised USD 65 million in the Series A funding round.

On the other hand, despite the geopolitical challenges, strategic investors show confidence in the prospects of Lithuania and the entire Baltic region. Major deals in the manufacturing sector are the best confirmation of this: Norway’s Kongsberg Defense & Aerospace, the largest Nordic space technology company, acquired 77% of Lithuanian small satellite developer NanoAvionics, and BEWI, one of the world’s largest packaging and insulation solutions companies, acquired 100% of Baltijos polistirenas shares.

One of the sectors showing the most pronounced consolidation trends is healthcare services. The largest transaction completed in Lithuania in this sector so far is the merger of the private medical business networks “InMedica” and “MediCA Group”. At least three active consolidators operate in the market – Affidea, Innova Capital Group (which acquired the shares of the largest dental network in Lithuania, Clinic DPC) and INVL Baltic Sea Growth Fund (which, among other transactions, signed the acquisition of the Nemunas and Eglės sanatorija clinics). The latter fund is also active in other sectors: it has been consolidating the waste management sector in the Baltic countries for some time, and also acquired the business of one of the largest life insurance companies in Finland, Mandatum Life, in Lithuania, Latvia and Estonia. Consolidation of the pharmacy sector is taking place both on a Baltic scale (Magnum’s acquisition of the Apotheca pharmacy chain) and on a wider regional level (Euroapotheca establishing a joint venture with Oriola Corporation, which will combine the pharmacy business of both countries in Sweden).

The renewable energy sector is active in terms of both development and acquisitions. The Danish renewable energy company “European Energy” intends to invest about EUR 1.5 billion in Lithuania by 2024 and build wind and solar power plants with a total capacity of more than 1,000 MW, and “Green Genius” has acquired 100% of the shares in the company, which has the right to develop an 85 MW wind power park in Jurbarkas district.

You can read full mid-market legal advisory review here.

You can read small-cap legal advisory review here.