The Baltic M&A market recorded a total of 134 deals worth €1.1bn in 2023, the third-highest volume since 2008, according to a new report published by law firm Ellex in association with Mergermarket.

While volumes dropped 12% from 152 and values 54% from an aggregate €2.4bn in 2022, that year was an unusually active one, as the European M&A market enjoyed a rebound from the pandemic and related global recession, supported in part by a glut of government financing.

“While 2023 did not break any records, Estonians should still be proud that 6 deals of Baltic top 10 deal chart were actually Estonian deals, including the highest value deal of 2023 – the acquisition of Latvian Gaso by Infortar. Also, the only IPO in the Baltic markets in 2023 was an Estonian one as we witnessed the listing of Infortar at the end of 2023. So, not a bad year after all for Estonian businesses” proudly presented Sven Papp, leading M&A partner of Ellex.

Of all the deals announced in the Baltics in 2023, 43% involved Lithuanian targets, keeping the country at the top of the table in deal volume terms, albeit down slightly from its 46% share in 2022. Estonia’s share of regional M&A volume also slid, from 39% to 37%, while Latvia’s rose by five percentage points to 20%, its highest share since 2018 (24%).

Inbound M&A

Inbound international investors accounted for 41% of transactions by volume in 2023, down four percentage points from 2022. However, they contributed 59% of deal value, showing that while international investors tend to make fewer transactions, they generally focus on larger targets. Indeed, six of the 10 largest deals of 2023 involved bidders from outside the region.

Rūta Armonė, Partner and Co-head of Corporate and M&A practice at Ellex in Lithuania commented: “When big players come here, they show it’s a stable economy, a safe economy, not threatened by the war in Ukraine. It shows trust and confirms what we’re trying to show people: it’s a great region to invest in.”

Sector focus

In terms of sectors, technology, media and telecoms (TMT) took the top spot in M&A volume and value terms for the period 2022/23, contributing 26% of total deal activity, down only marginally from 28% in 2020/21 and almost half (49%) of aggregate deal value in the region – up from 45% in 2020/21.

TMT looks set to experience further activity in the year ahead. According to Mergermarket’s intelligence tool, of the 45 ‘companies for sale’ stories the platform is tracking in the Baltics, the most (14) relate to assets in TMT.

“There’s always interest in the tech sector,” said Sarmis Spilbergs, Partner, Corporate and M&A, and Head of the Technology, Media and Communications practice at Ellex in Latvia. “Now there is also the health-tech sector. Funds which have an ESG focus are looking into health, research and green technology. Our clients are exploring options to invest in scale-ups that want to grow more strongly.”

Outlook

As we enter 2024, the global economic outlook is brightening. Inflation is dropping rapidly, with the expectation that interest rate cuts will follow. All three Baltic countries are expected to experience respectable growth in 2024.

The report is also available at ellex.legal.