At the Baltic M&A and Private Equity Forum, industry leaders stressed the importance of adapting to market conditions, building strong investor relationships and embracing innovative business models. Key topics included the importance of governance, political risk insurance, and opportunities in defence technology.
While the IPO market has stalled, a rise has been observed in secondary deals in the field of private equity – this is a trend to watch. Another change to keep in mind is the significant funds that are flowing into the defence sector.
The forum, hosted by Sorainen partner Toomas Prangli, included key speakers from the Baltics and beyond. The most notable transactions of the year were carried out by Mehiläinen of Finland, Vinted and Invalda INVL Group of Lithuania, and Elenger of Estonia.
Building Europe’s defence: a call to action from the EU Commissioner for Defence and Space
The day began with a special welcome video address from Andrius Kubilius, EU Commissioner for Defence and Space. He started his opening remarks by stressing that Europe needs investments in defence in the Baltic region and the European Union as a whole.
“If there is a war, the defence industry needs to be close to the borders, close to the battlefield. We need you to build up a defence industry right here in the European Union. Right here in the Baltic States,” said Kubilius, stressing the need for investments in defence.
Kubilius noted – and this was echoed later on by other speakers – that some investors remain hesitant to invest in defence due to taboos that exist. However, these taboos are gradually being broken, with increasing numbers of investors entering the defence sector. And as more investors are looking towards the defence sector, support from the Commission is already there, with big money allocated for defence: there have been proposals to mobilise up to EUR 800 billion for defence over the next four years, up to EUR 650 billion by allowing member states greater fiscal flexibility and safe loans, and EUR 150 billion in attractive AAA EU guaranteed loans.
According to Kubilius, the EU rulebook will be simplified before June to remove obstacles and bottlenecks to defence spending. He finished with: “Your investment in defence will help to build the European defence industry we need. To deter aggression, to prevent war and preserve peace.”
Shift from “easy” tech to “tough-tech”
The keynote speech, delivered by Garri Jones, Lazard’s senior advisor, started by comparing the early-2022 dominance of “easy” tech sectors (software, consumer internet and fintech) with the current rise of “tough-tech” sectors (DeepTech, InfraTech, and healthcare), amid increasing geopolitical uncertainty.
Jones noted that financing and attracting investors for “tough-tech” is more challenging, which may explain the commissioner’s earlier emphasis on the need for increased support and action.
Another significant change is demonstrated by the fact that, over the past year, four of the EU’s ten largest growth financing deals have been secondary deals. The secondary market, which recycles capital in private markets, is expanding rapidly.
Three financing trends for take away:
- Change in exits – The cloud has dramatically reduced the cost of going global, removing the need for huge capital. Therefore, the proportion of exits via IPO has declined. Companies stay private longer, and the main growth is happening there.
- Change in equity – Private equity has taken a bite out of public equity, while passive equity has taken a share from active equity, reducing the latter to only around half of what it was 20 years ago. On top of this, active equity is not as active as it was 20 years ago.
- Importance of governments – With rising geopolitical risks, governments have increasingly deployed innovation capital, particularly in “tough tech.” So much so, as a matter of fact, that governments are now the primary funding source for these sectors.
Jones emphasised that growth opportunities are abundant, particularly at world-class universities – especially at the post-PhD level. The crucial factor will be collaborating with governments.
2025 and beyond: no place for sloppy transactions!
In the day’s first panel discussion, moderated by Juhan Lang, head of the Investment Department at Äripäev, transaction advisers shed light on key global and regional trends in the M&A and private equity landscape.
On the subject of 2025, opinions on how the year will unfold were divided. Julijus Grigaliūnas, managing partner at Porta Finance, expressed some optimism: “We are doing really well in a terrible market.” Conversely, Lauris Balga, partner at Superia, had a more pessimistic view, saying that the market is generally appalling.
While the present looks a bit grim, what about deal-making opportunities lying ahead?
According to Garri Jones, Lazard’s senior advisor, if he were a global corporation or investor, he would be looking at engineering firms.
Panellists also emphasised the importance of investing in people, from finding the best CEO and a strong management team to hiring very good people day in and day out.
And of course, it is never too early to start thinking about growing and selling. It’s a big mistake not to do your homework on finding and getting to know the investors out there. Finding a buyer cannot be left until the company is ready to IPO; it has to be done earlier.
As Balga advised: “Stay private as long as you can. If you want to sell a business, be prepared. Don’t make sloppy transactions. Go in, and if you do it, do it well.”
Fundraising is what drives growth
With the help of experienced fund managers, valuable insights into the complexities of raising capital were provided.
Deimantė Korsakaitė, managing partner of INVL Baltic Sea Growth Fund and INVL Private Equity Fund II, started by sharing a success story of opening the second fund: “It came as a relief that we reached the target and surpassed it. It brought excitement and real relief that we did it. After a week, there came a bit of fear that it’s a lot of money, a lot of investors, a lot of work that needs to be done.”
Kaido Veske, founding partner at Livonia Partners, refers back to when Livonia’s first fund was getting raised: “You would go to places in Scandinavia and realise that the Baltics kind of already had a reputation in private equity.” Funds not behaving correctly managed to cause damage, especially as Scandinavia, with its large pool of LPs, requires the establishment of consistent performance benchmarks.
“Because in private equity, your returns ought to be consistent over time. Sometimes you can overperform, but you really shouldn’t underperform.”
He believes that raising money is not necessarily the most challenging part: “Finding the company is the hardest part. If you find the right companies, the funds will raise themselves.”
New players are entering the market
Another future prospect is the markets opening up. Korsakaitė sees growing discussion about opening opportunities for semi-professional investors, especially as high-net-worth individuals are participating more and more.
Veske, on the other hand, commented that Livonia Partners has internally agreed this is not the path they will pursue. While acknowledging the enormous pool of capital, he sees the need to focus on local developments and participate in them, but ultimately, it all comes back to performance.
Staying in contact is essential to success
“On the partner level, we have always prioritised creating those networks, some of those relationships to develop take 3/4/5 years. The key thing is to keep people up to date, keep your promises, and return the capital,” said Veske.
Korsakaitė noted that having a multi-family office allows INVL to network with a large pool of individuals. And while some relationships might lead you nowhere, it is essential to maintain them.
How are evolving standards shaping future expectations for the performance and governance of funds?
The second panel focused on future expectations and the challenges of private equity investments. As part of this, and with the growing emphasis on corporate governance, the panellists discussed the meaning of governance, regarding which experts had different thoughts.
For EBRD, this includes transparency, discipline and adherence to various guidelines. “We want fund managers to be open with us and the market. We indeed value constant engagement and information sharing,” shared Tomas Kairys, EBRD head of the Baltic States. Fund managers must be disciplined in adhering to their approach and meeting all regulatory and legal requirements, although this can be challenging for smaller teams. Another key factor is following the guidelines and ensuring a seat at the advisor’s table.
“It’s a word no one knows how to define,” commented Vahur Vallistu, CEO of LHV Asset Management, but did note three keywords: professionalism, openness and lessons learned. According to him, it is a red flag when a manager thinks their interests are more important than the investor’s money.
Kriss Spulis, senior head of Energy Infrastructure Investments at EIF, points out the importance of alignment of interests for both upside and downside scenarios and team setup and balance. Having only one person in a senior VP position can be a red flag. “You end up in tricky situations and with no easy discussions if that’s the case.”
ESG is not going anywhere
The approach to ESG varies significantly among stakeholders. Sille Pettai, moderator and CEO of SmartCap, emphasised that we have reached a stage where pursuing returns at any cost is no longer acceptable. Kairys reinforced this by stating that “the green aspect is a significant topic and is here to stay. ESG is embedded in our guidelines, dictating our actions and focus. We are fully committed.”
Conversely, Vallistu views ESG as a burdensome obligation: “While we do care about it, the current regulations are more detrimental than beneficial. There are numerous rules about what is acceptable and what is not. In the present context, I don’t believe it adds value. Therefore, ESG is not a mandate in our funds.”
It is time to rethink investment strategies
Dr. Yuri Romanenkov, partner at Claria Strategy Partners and Lecturer in Strategy at London Business School, shared recent results on how private capital investors navigate innovative business models.
With financial services, tech and healthcare disproportionately exposed to innovative business models, buyout investors must also learn to navigate them. To maximise the potential of these innovative business models, private capital investors have to rethink their strategy playbook, across the entire investment cycle.
Romanenkov recommends whole-heartedly embracing innovative, network-driven business models and prioritising governance to attract LPs.
Longer exits are the new normal
In today’s investment landscape, the anatomy of exits for investment funds has evolved, presenting both successes and challenges. While exploring the lessons from 2024 and expectations for 2025, one thing all agreed on is the changing length of exits.
“Compared to 5–10 years ago, exits are much longer. On average, it takes 18 months from idea to reality,” shared Nerijus Drobavičius, partner at INVL Baltic Sea Growth Fund. Additionally, he added, a lot more homework is needed for a successful exit.
And while local capital is emerging, it does not mean foreign capital has left.
For Lithuania’s Freor exit, offers came from various markets, including the USA, Poland and Germany. Estonia’s Stebby, sold by Livonia Partners, was bought by French investors. Maarja Pärs, Investment Director at Livonia Partners, noted that Stebby had strong buyer interest despite no initial plans to sell.
True, investors without previous experience in the region seemed only to be testing the waters, with no intention of seeing the transaction through to completion. By contrast, investors familiar with the area or already present here had no reservations about continuing to participate to conclusion. This does not imply that the latter group is unaware of the geopolitical risks, but rather that they are not deterred by them.
Europe must rely on innovative and proven systems for independence in defence
Mart Noorma, co-founder of Darkstar, highlighted the urgent need for battle-proven weapon systems and the importance of nurturing startups with such technologies.
While Ukrainian startups are developing cost-effective, ground-breaking defence products, they face challenges in terms of resources and understanding of export markets. At the same time, Europe and allied nations may have innovative products of this kind, but most are either not battle-proven or have failed on the battlefield – or, even if they are battle-proven, do not exist in sufficient quantities.
Noorma emphasised the importance of networking and the triple helix model of defence innovation, involving defence, academia and industry.
An audience member raised the issue that, while Noorma had mentioned that we should use AI ethically in the military tech sector, ethics are not a concern at all for the Russians. What should we take from that?
“You remember the ring from The Lord of the Rings? Isn’t it tempting to put it on your finger and become invisible? But it changes over time. As a scientist, I tell you, it’s not Terminator Skynet territory; we have to ensure we stay true to our values, regardless of what advice we get, because that’s what the war is about,” was Noorma’s answer.
Defence tech moves from the shadows to the spotlight
If just a couple of years ago, concerns about defence seemed like a relic of the past, now discussions about offence and defence have been normalised, as highlighted by Kaupo Lepasepp, moderator of the last panel and country managing partner at Sorainen Estonia.
As he pointed out, that change is actually a good sign that our society has at last recognised the risks and challenges of the sector. “If our society has values, those values need to be protected and allies need to be protected,” concluded Lepasepp before, together with the panellists, diving into the key factors and constraints in defence tech investments, noting the impact of the changing context of war on the sector’s attractiveness.
“If your product malfunctions in the market, you’ll lose money, maybe reputation. If it malfunctions on the battlefield, you’ll lose lives,” said Viktorija Trimbel, managing director at Coinvest Capital. She also identified three challenges for defence tech:
- the lifecycle of traditional VC investments
- military procurement cycles
- commercial bank procurement cycles.
Lepasepp pointed out that while the procurement cycle is a big problem, but it is also self-inflicted: “Remember, World War II lasted six years; there were no five-year procurement cycles.”
From the investors, it is valid to ask questions regarding the startup’s future, but the answer is not so straightforward as investors might be used to. Trimbel shared her take: “To the question, ‘If the procurement period is five-to-eight years, can you guarantee your startup will not die?’ I answered, ‘I can’t guarantee that, but I can guarantee that it will die in one-to-two years if there is no procurement.’”
And although the procurement process is evolving, it is not uniform across countries.
Top-tier talent is entering defence tech
Another changing area is the number of people from academia joining the industry. This is especially noticeable in Germany, where taking a step from academia into defence would previously have given you a bad reputation.
“What we have seen is people leaving companies they have built and starting new ones, moving into the field. Maybe not directly out of universities, but later,” commented Philip Jungen, co-founder of Darkstar.
What might also support the change of academia getting more involved is the possibility for any industry to pivot to defence, as Trimbel pointed out: “Any industry can turn to defence now, from food to textiles. You can think of startups, see how they match your portfolio, and turn them into your entry to the industry.”
“40% of ChatGPT users think it can take their job – this means that 60% have not really understood what is going on.”
Indrek Seppo, artificial intelligence consultant, finished the programme with a discussion of the transformative impact of AI, comparing its potential to change the world to the effects of the internet and electricity.
While AI experts do exist, they are often still in academia, and businesses have yet to grasp AI’s potential fully. AI is currently complementing human knowledge, with hallucination rates decreasing.
In the context of M&A and private equity, AI can cover the whole cycle, including origination, pipeline management, due diligence, valuation, communication strategies, and portfolio management. Failure is part of the process of AI implementation, but success will follow. What is essential to note is that AI has no natural limits, making its progress unpredictable.
“AI is the future which arrived yesterday,” was Seppo’s firm conclusion.
Tariff war with the US – a challenge or an opportunity?
One topic that kept emerging across the panels and presentations throughout the day was the USA and its influence on the European and Baltic markets.
Starting from the fundamental differences, as Garri Jones said: “While European investors are focused on three wars – the war on carbon, war on ill-health and war on war itself – US investors at the same time are focused on arming for those wars with the development of supercomputing (AI).”
Significant exposure to the US can really change risk factors for supply chains and have a negative influence on the most valuable companies and businesses. At the same time, Kaupo Lepasepp pointed out that, since Trump is making the US less attractive to talent, that means our domestic EU talent staying here.
Julijus Grigaliūnas had the same thought, saying that there is a lot of movement in executive talent, as people don’t want to be in the USA or China anymore. Compared to capital, talent is much more mobile, and with what is happening worldwide, many people could find new and interesting places.
Valeria Kiisk believes that the tariff war could actually help the European Union focus on its very fragmented internal market. Even though she sees it as having the possibility of giving a boost to Europe and the region, she also warns of the risks: “We still have some structural issues we need to think about, e.g., the ageing population. I want to be optimistic, but we need to make very smart choices.”
Elenger, Invalda INVL Group, Vinted and Mehiläinen announced as Baltic deals of the year 2025
As per tradition, the Baltic deals of the year were announced at the forum.
The Baltic Outbound Deal of the Year was the Estonian company Elenger’s acquisition of EWE Group’s Polish energy businesses. The transaction totals EUR 120 million, making it the most significant Estonian investment in Poland.
The Baltic Venture Capital Deal of the Year was Lithuanian unicorn Vinted’s EUR 340 million secondary round, which was led by asset manager TPG.
The Baltic Private Equity Deal of the Year was Invalda INVL Group’s exit from Lithuania’s largest private healthcare network, InMedica. The acquisition of InMedica by Finnish-based private healthcare provider Mehiläinen was announced as the Baltic M&A Deal of the Year.
The awards cover deals completed between 1 January 2024 and 31 March 2025. The winning deals were selected based on their strategic importance for the Baltic market; their value, complexity, and/or innovative nature; their ESG impact; and the involvement of Baltic stakeholders.
The Baltic M&A and Private Equity Forum 2025 was organised by Sorainen on 22 April in Tallinn, in cooperation with leading Estonian business media outlet Äripäev. As in previous years, the event gathered together 250 participants representing private equity, venture capital funds, investment banking, consultants, lawyers, business executives and owners from the Baltics and beyond.
