Ellex Baltic M&A Monitor 2021: the market demonstrates resilience in the face of COVID-19 pandemic
Despite the impact of COVID-19, the Baltic region in 2020 recorded 70 M&A deals worth a publicly-announced total of almost €1.2bn – a level of activity consistent, or even slightly above, the previous year, according to a new report published by Ellex in association with Mergermarket.
Ellex Baltic M&A Monitor provides analysis of M&A activity in 2020 in Estonia, Latvia and Lithuania, along with forecasts for the year ahead.
“It’s been really counterintuitive, given the COVID-19 situation and economic difficulties,” said Raimonds Slaidiņš, a partner at Ellex in Latvia. “Our transaction work has been much greater than we expected. Resilience has been a historical characteristic of the Baltics. This was very apparent in the global financial crisis and again last year when we had a very extreme situation.”
Europe as a whole has been hit hard by the pandemic. M&A volumes dropped 17% to 6,789 transactions from the 8,151 announced in 2019 – further emphasising the strong figures recorded in the Baltics.
Sven Papp, partner at Ellex in Estonia, explained some of the reasons behind this resilience: “The market had a shock early in 2020, and nobody knew what was going to happen. But after a few months, when the government had announced its subsidy programme, and private banks declared payment holidays for loans and other measures, things started to settle. Support allowed companies to live through the difficulties, and by the beginning of the summer we started to see deals come in.”
Technology, media and telecommunications (TMT) continued to be a major driver of M&A in the region. In 2019/20, the sector accounted for 20% of all transactions in the Baltics – up from 17% in 2017/18 – and 31% of total deal value, up from 9% in 2017/18. It also contributed three of the six biggest Baltic deals in 2020, including the second and third largest, as well as three further top-14 deals.
Private equity (PE) activity in the Baltics was also slightly ascendant in 2020, with PE M&A volume up to 17 deals from 15 in 2019, and aggregate value rising to €301m from €283m. Growing interest in the region from global PE firms on the hunt for yield – as well as the emergence of regional funds – means the alternative finance space is likely to be a long-term growth area.
Paulius Gruodis, a partner at Ellex in Lithuania, explained: “Private equity funds have accumulated a lot of dry powder; a lot of cash is still in play. In 2021, when there is more certainty and vaccination programmes accelerate, it is likely that we will see even more M&A activity and standout deals.”
Having weathered the unprecedented shocks of 2020 well, the Baltic M&A market is in a strong position to enjoy a resurgence in 2021 and beyond.
Read the full report here.