The first half of 2022 has not (yet) yielded such high profile deals as seen in 2021 (like Printful becoming the first Latvian “unicorn”) but there has been a steady trickle of transactions following the larger wave of 2021.
A very dynamic start of the year fuelled by 2021 optimism and “post-Covid-19” sentiment was followed by a complete but short standstill triggered by Russia’s invasion into Ukraine on 24th February, and although most of the transactions continued after a while, a number of deals fell apart and the overall pace of many projects significantly slowed down as both local businesses and investors tried to grasp rapidly changing global and regional implications of Ukraine war and to assess the impact of massive sanctions imposed on Russia and Belorussia on local businesses.
The shift in energy markets has opened new opportunities and a fresh perspective on renewables projects , resulting in a steep rise in investment activity for both wind and solar energy projects in Latvia and across the Baltics. Investors such as Ignitis Group, Taaleri Energia and Utilitas have been very active in consolidating wind energy projects in Latvia while incumbent energy company Latvenergo has launched large scale joint venture with state forest company aimed to develop wind energy projects.
The deals so far published this year show activity across various sectors and industries. Predictably, IT and TMT sectors continue to be among the most active, same as B2B services (BaltCap’s sale of Vendon to Azkoyen, sale of TVG to Pax8, Tet’s acquisition of Telia Latvia, BaltCap’s sale of Uprent to Renta Group, acquisition of Nordigen by GoCardless). Energy and real estate transactions are plentiful (BaltCap Infrastructure Fund’s sale of Energia Verde to Gren, acquisition of Stockmann trade centres in Riga and Tallinn by Viru Keemia Group, acquisition by Hili Properties of trade centre in Riga, acquisition by Baltic Green Fund of significant forest portfolio etc.). The recent merger of Signet Bank with Expobank shows some further consolidation in the financial services sector in Latvia and there is also continuous interest in healthcare businesses (as shown by the acquisition by Syneos Health of local clinical research service provider AmberCRO).
Activity on public markets has been sluggish, this year so far has produced only one new IPO on Riga Stock Exchange, a local pension management company INDEXO, but some more might be on the way. Meanwhile, VC investments into Latvian start-ups are on the wave, particular activity visible in the field of foreign VC players (both funds and angel investors) investing in Latvian targets.
The resilience of the transactions market and trust of investors in our region has proved remarkable, despite the Ukraine war and mounting global challenges the deal flow, although at a much calmer pace, continues and remains promising for the second half of the year. The extensive liquidity of private equity and venture capital players and highly competitive environment with relatively scarce targets still is one of the key factors contributing to overall deal activity and business valuations.
You can read about the transaction market trends in Estonia here.
By Guntars Zile, Partner, COBALT