Ellex Transaction Radar: Estonian transaction market declined 28% in 2023
Estonia witnessed a total of 137 transactions in 2023, reflecting a decrease of 54 transactions compared to the previous year, 2022. The Transaction Radar conducted by Ellex M&A experts in Estonia indicates that despite a few noteworthy transactions, caution prevailed in the Estonian transaction market last year, with available capital on standby for investment.
According to Sven Papp, partner at Ellex in Estonia, the transaction world of 2023 will be characterized by prolonged negotiations. “One of the reasons is greater diligence and thoroughness in concluding agreements,” said Papp. He cites the second reason as “the price of money”, because interest has made borrowed money significantly more expensive, and this forces you to consider more thoroughly what you are buying. There is also a significant gap between the price expectations of the buyer and the seller. Papp also cites the tightened regulatory environment as the third reason, because the Estonian concentration control threshold is very low and even a slightly larger transaction requires a merger permit. Furthermore, as of September, a credibility check for foreign investments has been introduced.
Transaction Radar Forecast for 2024: positive advancements expected in defence, technology, energy production, pharmaceuticals, medicine, and entertainment
Macro indicators influencing the transaction market, such as global interest rates and inflation, have reached a stable state. Consequently, a more conducive environment for transactions has emerged, aligning the perspectives of buyers and sellers regarding future cash flows and company valuations. Nevertheless, it’s premature to assert the presence of economic growth.
“Given the backdrop of global events, Estonia’s economic growth increasingly hinges on education and our success in cultivating a smart economy. This trajectory doesn’t require a large population or a central geographical location,” explained Risto Vahimets, partner and head of transactions at Ellex in Estonia.
The technology sector in 2023: corrections and the emergence of the green sector
The year 2023 can be viewed as a phase of adjustments in the technology sector, particularly within the realm of venture capital. There has been a notable decrease in both the number and volumes of investments, resulting in a deceleration of transaction activity. This slowdown has been accompanied by layoffs and corrections in company valuations. Antti Perli, partner at Ellex in Estonia, delves further into these developments in the technology sector in the Transaction Radar report.
In the stock market of 2023: there’s capital, there’s interest, but there’s a shortage of courage
“The year 2023 on the Nasdaq Tallinn Stock Exchange was unquestionably intriguing— the Baltic market witnessed only three new issuers, bond offerings achieved remarkable success, and the First North alternative market experienced its first trading termination due to bankruptcy,” stated Gerli Kivisoo, partner at Ellex in Estonia.
Regulatory whirlwinds prolonged the deals in 2023
“Forecasts for the upcoming year indicate that regulatory whirlwinds are bound to make an already complex transactional environment increasingly difficult to navigate. In a post-inflation world, no significant transactions are expected to evade merger control,” note Martin Mäesalu, partner, and Kevin Gerretz, senior associate at Ellex in Estonia.
Ellex’s Transaction Radar is released semi-annually, providing analysis of the context and motivations behind significant transactions in Estonia, while also offering forecasts for potential developments in the upcoming periods.
Explore the comprehensive market analysis HERE.