Ellex Baltic M&A Monitor 2019: record M&A activity puts Baltic region firmly on dealmaking map

The Baltic states – Estonia, Latvia and Lithuania – completed a record year for M&A activity in 2018, according to the 2019 edition of the Baltic M&A Monitor, a comprehensive review of mergers and acquisitions activity in the Baltic region prepared by Ellex, in association with Mergermarket. There were 74 registered deals in the Baltics in 2018, up 43% compared to 2017. Meanwhile, total value skyrocketed 320% year on year to just over €2.7bn. Ellex was involved in 6 of the 10 largest M&A transactions in the Baltics in 2018.
 
“The Baltic region has seen growing interest from international investors in recent years,” said Sven Papp, partner at Ellex in Estonia. “As well as the region’s competitive advantages as an investment destination, this also reflects a significant number of international transactions with Baltic components.”
 
International and domestic private equity (PE) funds have become increasingly active in the region – significantly, the biggest deal of 2018 was the €1bn acquisition of a 60% stake in the Luminor Group by US-based PE fund Blackstone Group. This was not only one of the largest transactions on record in the region, but the biggest PE majority stake investment in a universal bank anywhere in the world over the past decade.
 
Paulius Gruodis, partner at Ellex in Lithuania, commented: “This was a megadeal by Blackstone, and I think it changed the overall landscape of the Baltic M&A market. Though it is not the first PE fund coming into the region – we have been working with several already. US funds might trigger an increase in buyout activity in the future.”
 
In terms of sectors, the Blackstone-Luminor deal reflected ongoing consolidation in the regional financial sector, which made up 30% of total deal value in the region in 2017-2018. Meanwhile the technology, media and telecommunications (TMT) sector continued to be a major driver of dealmaking activity. In the past two years, TMT accounted for 17% of all deals by volume, more than any other industry. The energy, mining and utilities (EMU) sector also proved buoyant, with three deals in the top 10.
 
While overall economic growth is expected to cool in 2019 and the global environment presents looming downside risks, the outlook for the dynamic Baltic countries is excellent. The three Baltic countries have achieved remarkable macroeconomic and political stability and offer an excellent environment for business. At the moment Estonia, Latvia and Lithuania are among the most competitive economies in Europe in terms of skills, regulation, taxation and cost.
 
“These are developing markets with a good growth rate,” said Raimonds Slaidins, partner at Ellex in Latvia. “Based on the pipeline that we have now, M&A activity is set to continue at a good pace for the next year, Baltic-wide.”
 
About Baltic M&A Monitor
 
The Baltic M&A Monitor closely examines M&A trends in the three Baltic countries – Estonia, Latvia and Lithuania – including country and sector-specific insights, and forecasts for the year ahead. Ellex and Mergermarket have jointly prepared this annual report since 2016.
 
To view the full report, please click here.