{"id":6709,"date":"2010-04-29T09:00:03","date_gmt":"2010-04-29T06:00:03","guid":{"rendered":"https:\/\/redgatecapital.eu\/aare-tammemae-in-top-specialists-forum-at-the-baltic-business-law-conference-2010\/"},"modified":"2021-07-07T10:13:37","modified_gmt":"2021-07-07T07:13:37","slug":"aare-tammemae-in-top-specialists-forum-at-the-baltic-business-law-conference-2010","status":"publish","type":"post","link":"https:\/\/redgatecapital.eu\/en\/aare-tammemae-in-top-specialists-forum-at-the-baltic-business-law-conference-2010\/","title":{"rendered":"Aare Tammem\u00e4e in top specialists\u2019 forum at the Baltic Business Law Conference 2010"},"content":{"rendered":"
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Mr Aare Tammem\u00e4e was one of the top specialists to discuss the M&A situation in the Baltics. Other specialists were: Mr Priit Koit from SEB Enskilda; Mr Viljar Arakas, CEO of Eften Capital and Gert Tiivas, CEO of East Capital.<\/p>\n

Below is a summary of questions that were addressed to the panel and their answers.<\/p>\n

1.\u00a0What was the market like for you in 2008\/2009 \u2013 what have you been up to?
\nThe market has been quite successful. We helped in a few major restructuring processes (e.g. Sportland), and selling (Norby) and buying companies (Loksa Shipyard).<\/p>\n

2.\u00a0Was there a crisis in the years 2008\/2009 \u2013 in what way did it appear?
\nAs with the economy, so the M&A market evolves in cycles. Global finance and the economic crisis has narrowed down companies\u2019 financial possibilities and that has reduced the number of mergers and acquisitions. Compared to the peak of 2007 the number of deals in the world (including the Baltics) decreased fourfold. Most of the deals were financed by equity capital, because the finance sector didn\u2019t give out new loans for acquisitions. Starting from 2002, when the last growth started, there was a trend towards increased globalization, megadeals (mostly between banks), advantageous opportunities to find financing and highly active venture capital funds. The growth peaked in 2007. The biggest fall and downward trend was in 2008, but 2009 has showed signs of recovery in the number and volume of deals.<\/p>\n

3.\u00a0What has changed in your subject field? What is your \u201eanswer\u201c to change?
\nForced sales are the main keyword. Change in strategy, debts, difficulties, compared to the main business\u00a0 real estate is not liquid etc.<\/p>\n

The sellers have changed. Sellers are companies who are seeking to attract new strategic investors to breathe new life into their businesses. While selling the real estate is more difficult at the moment, companies that produce cash flows are easier to sell. Even foreign investors are selling Estonian companies because they want to get out of this market due to bigger risks or some other strategic reason.<\/p>\n

An example of this was the transaction by which the world-famous A.P. Moller-Maersk Group sold Loksa Shipyard, which they had acquired 14 years previously, to local investors, who were advised by Redgate Capital. Estonian investors took advantage of the foreign owner\u2019s change in strategy and decided to bring to life a brave business plan to change the company from ship building to a producer of large metal constructions. This deal couldn\u2019t have happened during the boom, but now Estonian entrepreneurs have the chance to take a big step in the new export market. Partial financing came from a bank operating in the Baltics.<\/p>\n

In our work \u2013 more work with fewer people. Confidence to invest is lower. Partners have to get their hands dirty – the same trend can be seen in other Estonian companies, e.g. Koger & Partnerid.<\/p>\n

4.\u00a0Why aren\u2019t we seeing any new deals \u2013 is there nothing to sell or are there no buyers?
\nPE funds and pension funds are gone as buyers. Trends: mergers and acquisitions are carried out mostly to cut costs, to enlarge market share and turnover, to expand into new markets and to create synergy. However, selling the company shouldn\u2019t be excluded in a situation where the goal is to change strategies, solve problems with debt or to move into a whole new market. We are going to hear more and more prosaic reasons why an active owner would like to withdraw from the company to enjoy retirement<\/p>\n

When and how could the number of transactions rise in the Baltics and or Estonia? Transactions are made with equity capital. There are fewer big transactions. Big isn\u2019t necessarily better, smaller companies are more active. Taking into consideration the present situation, where banks\u2019 loan portfolios have fallen and banks do not want to give out new loans very easily, it\u2019s expected that more Baltic companies will merge. Weaker companies will be taken over by the stronger ones and companies\u2019 values are considered lower than before the crisis. A million EEK is a big sum of money and transactions are mostly financed with companies\u2019 own resources, private capital and mezzanine loans.<\/p>\n

5.\u00a0Does the (foreign) investor find his way to Estonia? What could we offer the investor? Or will he go to Latvia instead, where a number of privatizations to fill the state treasury are expected ?
\nForeign investors expect the macro picture to be in order, so Estonia has the advantage. Latvia and Lithuania will also become more interesting for the professional investor. Estonia could offer opportunities to companies that are in the start of the rising period. We see that investors are interested in commerce, energy, the metal industry and other industries. There are opportunities to take over and consolidate.<\/p>\n

6.\u00a0Who is the investor at the moment? Where does the foreign investor come from and who is he?
\nIn Estonia investors have changed. First, there are foreign strategic investors, who feel that it\u2019s the perfect time to enter or expand in the near home markets. For example last year we advised in the selling of the telecommunications company Norby Telecom Estonia, where the buyer was an international group Linxtelecom which is of Dutch origin. Buyers are also local entrepreneurs who have enough capital. Of course traditional investors are private capital investors (funds) for whom this is the perfect time to buy. An important group of investors are HNWIs and many of them are investing actively as are boards of directors.
\nPension funds and PE funds are investing very little.<\/p>\n

7.\u00a0What would give a boost to the market?
\nEvery company should take a look at its financial condition and current value. A greater willingness by banks and local pension funds to invest would help.<\/p>\n

8.\u00a0What is market going to be like in the near future \u2013 are investments coming to Estonia or is Estonian capital invested in foreign countries?
\nThere is interest in our market. Interested parties are mainly from Scandinavia but also from Lithuania and Poland.<\/p>\n<\/div>\n<\/div>\n

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Mr Aare Tammem\u00e4e was one of the top specialists to discuss the M&A situation in the Baltics. Other specialists were: Mr Priit Koit from SEB Enskilda; Mr Viljar Arakas, CEO of Eften Capital and Gert Tiivas, CEO of East Capital. Below is a summary of questions that were addressed to the panel and their answers. 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