In early spring we were looking back at a very disappointing first quarter if measured by the M&A activity (the full note can be found here). Almost immediately after it was published the quiet period ended and things started accelerating in the market. Some pressure and frenzy at that time of year is not untypical as deal-makers try to wrap the things up before the summer season starts. But this year the M&A market continued to gather momentum also during the summer months. Apparently, quite a few people preferred real work to working on their suntan!

What kind of deals have we seen over the months of July and August? Most of the transactions announced can be attributed to either of the two broadly defined categories – acquisitions made by strategic investors, or transactions involving private equity and financial sponsors.

For strategic investors it started off with the acquisition of Dobele-based producer of construction chemicals, Tenachem, by the Belgian Souda which operates in a similar industry. Given that we do not see Belgian investors in the Baltics all that often this is quite a remarkable transaction. In another deal, Vienna Insurance Group AG, which already had quite a significant presence in the Baltic markets, acquired Baltikums AAS, a Latvian non-life insurer. And Estonian UP Invest, the shareholder of Baltic News Service, acquired LETA, a Latvian news agency, thus solidifying its position in the media market.

Private equity has been and is considered to be one of the key drivers of deal-making activity in the Baltics in the years to come. True to this, BaltCap, probably the best-known name in the Baltic private equity space, acquired BPT Real Estate, a real estate investment management company active in the Baltics and in Poland. Although technically the target company is headquartered in Tallinn and the main spokesman about the deal comes from the BaltCap Lithuanian office we nevertheless believe that this transaction relates to Latvia as much as to the neighbour states. In another surprise deal the European Bank for Reconstruction and Development (EBRD), which has not been that active in the region lately, apart from the financial sector, announced its investment of EUR 10 million in exchange for a 30% stake in Eco Baltia AS, a waste management company.

The new investments notwithstanding we have seen another silent exit whereby BaltCap sold its 48% of shares in VLT SIA, a producer of moulded fibre packaging products (namely, egg trays and egg boxes), back to the company management. (Given our special interest in the private equity market we might look into this exit transaction more in detail in a separate note)

Any transaction, irrespective of size, where a Latvian company makes an acquisition abroad automatically becomes noteworthy. This very much applies to the acquisition of DL Distributors, a distributor of DELL products in Estonia, by the Latvian ELKO Group, even despite the fact that the transaction was kept low profile and not too much detail was offered.

Practically everyone is back in their offices starting from this week. Provided that the momentum keeps going we might be looking forward to quite an exciting tail end of the year 2015.

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