Mergers and acquisitions activity in 2021 not only easily surpassed the pre-pandemic level, but also hit the all-time record by a considerable margin (the previous deal count record was exceeded by more than 50%).

There were a number of factors that contributed to such an extraordinary rise. Due to the pandemic, some deals from 2020 were postponed, while others were delayed for other reasons. But this is only a small part of the story, says Mantas Petkevičius, head of our Private Equity & Venture Capital team.

Private equity houses make an impact

Both regional and international private equity and venture capital funds have been really active in the market. The biggest regional private equity houses (INVL Asset Management, BaltCap, Livonia) have funds at the beginning of their investment cycle, so the dry powder held by them is at historic highs. On top of this, the extent of their funds (EUR 150 million and above) allows them to compete for almost all the biggest deals in the market. International financial investors also had and still have an abundance of investable cash and Lithuania has long been within their investment territory. Therefore, both regional private equity players and international ones will gradually have a bigger and bigger impact on overall market activity in Lithuania and the Baltics in general. And if you look at the statistics, you will see that financial investors participated in the majority of the biggest regional deals.

TMT sector leads the way

While the most active sector was TMT (telecommunication, media and technology) (e.g. sales of Pigu, Viena sąskaita, and Deeper, exits from or investments into a number of startups etc.), we saw a number of remarkable transactions in the energy sector (e.g. the sale of Fortum, the acquisition of three wind parks by Taaleri Energy and Lords LB Asset Management) and the financial sector (e.g. the sale of Aviva to Allianz, the sale of a minority share in Siauliu bankas by EBRD). Looking into 2022, we can probably expect that technology, renewable energy and healthcare will remain at the forefront of investors’ minds.

Startups attract tens of millions in capital

One of the main factors differentiating 2021 from previous years in Lithuania was an exceptionally large number of startup- and VC-related transactions – both capital raisings by the start-ups and exits. Not only have the number of transactions risen, but so has their value. We simply didn’t see deals such as the Vinted, Interactio, PVcase, Dokobit, CGTrader, Whatagraph and Hostinger transactions prior to this. It’s noteworthy that the value of transactions have risen throughout the whole ecosystem chain, i.e. we not only have more and more startups that can attract tens of millions in capital, but earlier-stage “seed” investments are also gradually rising. If five years ago venture capital funds were investing several hundred thousand euros in early-stage start-ups, investments now are about five times higher on average. With startups, success today leads to success in the future, meaning proceeds from exits will return to the ecosystem and further bolster the speed of growth. So, we should have no doubt that startup-related deal activity will rise further.

Read more about the M&A and private equity market in the Baltics and Belarus – overview of 2021 and trends.