The holiday season seems to have really kicked-off here in Latvia this week. Before joining the crowds moving out of the city it might be a good moment to reflect on the M&A activity during the first 6 months of this year. With c. 20 transactions recorded, the sample really is not large enough to draw any firm conclusions about the market trends; in general, the activity has been spread across a range of sectors and industries. The largest transaction to date has been the acquisition of RSA Baltic and Polish insurance business, which included Balta AAS in Latvia, by the Polish PZU (more on that in our earlier note).

The process of strategic investors leaving the market, which started a few years ago, has continued in 2014, with the companies that either have not been very successful in reaching the critical mass or have seen their strategies changing after the financial crisis still leaving. Along with RSA, we saw the Lithuanian retailer Palink and the Finnish waste management company L&T making an exit and selling their operations to local investors (more on the L&T transaction here) this year. In the case of RSA, one foreign investor got replaced with another who apparently has a stronger commitment to this region.

To compensate for the exits, luckily, there were other foreign investors who have seen this as an opportune moment to enter the market or to increase their shareholding. The Norwegian B2Holding, which focuses on distressed assets management, acquired Creditreform Latvija to serve as a platform for its Latvian operations. Visma Group, the Norwegian IT company, picked up FMS SIA and FMS Software SIA, the enterprise resource planning software developers (more on that here). Furthermore, in a transaction not that often seen in Latvia, a start-up developer of contact management software, Cobook SIA, was acquired by Full Contact Inc, a larger competitor, who immediately moved all the staff and further development work to the US.

Private equity remained a significant driver of M&A transaction flow, both making new investments and exiting from earlier ones. FlyCap, a newly established fund manager, made its first investment in Mailigen, an email marketing services provider, while BaltCap, probably the best-known name in the Baltic private equity, made its exit from the concrete manufacturer Primekss (more on that here). In addition to these, we have become aware of several “silent” deals where, according to the Register of Enterprises, a change of ownership has been registered but none of the parties involved have announced it in public. More detail on this and other interesting information on the Latvian private equity and venture capital market will be available in our forthcoming M&A Intelligence Report, which will be released in August.

In the beginning on 2014 all the forecasts cited three major potential transactions that will drive the market – the sales of Citadele banka, Liepajas Metalurgs and Air Baltic Corporation. While causing a very public (and not always very constructive) debate about the merits and need to sell it at all, the Citadele disposal is well on its way and the deal might actually close this year. According to the latest public statements by the administrator, there are still 5 or 6 interested parties discussing the possible acquisition of the insolvent Liepajas Metalurgs. And with the uncertainty about potential legal action from the European Commission in relation to the government support having been removed recently, the efforts to find an investor for AirBaltic, the national air carrier, are likely to resume with renewed vigor. Even one of these ‘jumbo” deals closing during the year will have a major effect on the market, but we will have to wait until the autumn for this!


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