2018 proved to be a record year for M&A dealmaking in the Baltics, with Technology, Media & Telecommunications (TMT) among the hottest sectors. Although global TMT sector trends show a cool-off by both deal count and deal value, nevertheless mid-2019 results in the Baltics and Belarus plus the pipeline ahead suggest that the fast pace of 2018 has continued into 2019. M&A activity in the TMT sector is expected to continue demonstrating the power of the tech business and to be one of the key drivers in the regional deal market.
Sale of Baltic Classifieds Group – the largest TMT deal in 2019?
The sale to Apax Partners of Baltic Classifieds Group, an online classified advertisements business in the Baltics, by Estonian holding UP Invest will likely become the most prominent tombstone of the year not only for TMT but for the entire regional M&A deal market. The deal value is not disclosed but it has the potential to become a robust 2019 response to the largest TMT deal of 2018 – Bolt (ex Taxify) that raised a USD 175 million investment. This recent multimillion transaction also demonstrates the variety and dynamics of TMT deals, where the largest investment shifts from a tech and transport profile target (Bolt) to a digital sales and advertising business (Baltic Classifieds Group).
Media sector players rely on acquisitions to strengthen their position
In the media segment the largest players are utilising acquisitions to realise synergies for increasing both market share and digital sales in the Baltic market. Examples of recent such transactions include:
- acquisition of internet portal operator Tipro Group (Lithuania) by All Media Lithuania, part of the largest Baltic media group ‒ All Media Baltics;
- sale of ticketing service platform company Bilesu Paradize (Latvia) to Estonia-based media group Ekspress Grupp;
- acquisition of Artist Media’s shares by Estonia’s All Media Eesti (again, All Media Baltics).
Interestingly, the media segment has also seen entry by non-market players. A recent example is the acquisition of Ohtuleht Kirjastus, an Estonia-based publisher of newspapers and magazines, by Alexela Group (Estonia), which operates in the energy, metal industry and property development sectors.
Tech startup boom continues
Recent investments in Baltic- and Belarus-based tech companies demonstrate that tech startups remain on investors’ radar screens. Among the tech companies that recently attracted investments are:
- Whatagraph (marketing analytics and social media reporting platform);
- SixAds (digital ads tools for e-commerce);
- Millo Appliances (developer of smart blender).
Notable tech startups with a Baltic origin that seek new fundraising in 2019 are Trafi (Series C) and TransferGo (Series C). Other local TMT startups looking to raise funding are Levikom (an Estonian telecommunications and IT services group) and Exaster (a Lithuanian big data predictive analytics technology company).
The recent cash-out from TransferWise by its founders and early investors is also a great opportunity for Baltic startup ecosystem participants to grow their businesses. New cash in the hands of people with an IT and tech profile has all the chances of being re-invested in other tech startups in our region.
In Belarus, the High-Tech Park regime providing tax benefits, English law elements and simplified regulatory requirements envisages one of the key opportunities for startups. The regime is also gaining high popularity among foreign IT companies acquiring local development teams and opening R&D offices in Belarus. This year more than a hundred new companies have already joined High-Tech Park residents with the overall number now over five hundred. Regulatory benefits for mining, ICO and crypto businesses in the High-Tech Park allow Currency.com, a crypto exchange platform, to also join the list of High-Tech Park recent residents.
Domestic venture capital funds investing
New venture capital funds such as Practica Venture Capital II proved their tech orientation with recent investments in Lithuania-based tech startups Pipelinepharma and PVcase. Practica Capital also recently made its first investment in Latvia – along with Karma Ventures and several other investors, Practica Capital invested in Sonarworks, a company developing popular innovative Sound Calibration Technology. New venture capital fund 70 Ventures is also seeking investment opportunities which, in combination with anticipated exits by other domestic funds, pose decent opportunities for the TMT sector.
Although venture capital funds are still not very developed in Belarus, Haxus and Bulba Venture funds operated by well-known IT startup community members from Belarus continue developing their projects, such as Flo and OneSoil, in Belarus. Angel investors have also become quite active working with IT startups.
Telecommunications sector leaders to join forces in developing 5G network
International TMT news highlighted the recent announcement by Baltic telecom majors Bitė and Tele2 about their deal to create a network-sharing joint venture in Latvia and Lithuania. The transaction is still at the planning stage but when implemented this network sharing will undoubtedly accelerate the 5G journey of the two countries and boost their digital economies.
Although such collaborations are quite common in Europe and globally, they are completely new in the fiercely competitive Baltic mobile service market. Therefore this deal is set to become a landmark milestone and a potential trend-setter in the regional telecoms sector.
In Belarus, the 5G topic is becoming hot this year, especially with local 4G infrastructure provider BeCloud and mobile operator Velcom, part of A1 Telekom Austria Group. Additionally, a pilot project introducing 5G technology for driverless Belaz trucks was recently announced.
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