Baltic Business News: Baltics regain attractiveness for M&A transactions

Motivation to expand business in neighbouring markets has returned. More companies looking for potential targets in the Baltics indicates positive expectations for development in the region. As for geographical preferences, companies looking for targets in the CIS region are stable in terms of numbers, while the Nordic countries and the rest of Europe have become slightly less popular compared with previous results of the Baltic M&A market survey prepared by law firm SORAINEN.

The third annual Baltic M&A market survey organised by SORAINEN together with Baltic business dailies Dienas bizness, Äripäev and Verslo žinios at the end of October helped to compare and analyse business interests and ambitions in the region.

The survey suggests that the general mood in the Baltic market has become less certain. In particular, a decline is evident in the number of respondents with clear plans to buy another business or certain that they will not do so. However, at the same time the number of businesses open for good opportunities has increased.

“In general, in comparison to the previous two to three years when the economic recession caused a quite pessimistic mood, this year has brought more activity in M&A and private equity transactions. In keeping with this new mood, the next year is also promising to be dynamic,” comments Eva Berlaus, head of the SORAINEN M&A and Private Equity Team in Latvia.

This year, the greatest level of interest apparent from the survey was shown by companies represented in Lithuania. Interest in M&A activities is remarkably higher there than on average in the Baltics. Over 60% of Lithuania-based respondents reported either a certain intention or a general interest in acquisition, while 40% would offer their company or shares or would consider a sale if a proposal was attractive.

Both acquirers (52%) and sellers (34%) are more interested in transactions involving a controlling stake (over 50%) of a company’s shares. Notably, the gap between the interests of these two groups has narrowed since the previous survey, thus creating a good environment for deals to take place.

As for the main reasons driving M&A activities, operational synergy has regained its importance and, as in 2011, is ranked as the top benefit that companies aim to achieve through M&A transactions. However, respondents have become more conservative in aiming for new markets. The opportunity to improve company cash flow as the driving factor behind M&A is currently twice as important as a year ago.

The role of law firms as advisors in M&A transactions has grown year by year. At the same time, the number of respondents announcing that their activities would not require the involvement of external advisors has significantly declined during the whole research period. This trend promises many large-scale and complicated transactions for SORAINEN in the near future. More detailed results will be revealed and discussed at the Baltic M&A and Private Equity Forum taking place in Riga, Latvia this week.

Article was published on Baltic Business News website on 29 Oct 2013.

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