M&A activity reached fever pitch in 2016 - a year which saw the highest number of transactions in the region ever recorded by Mergermarket, according to a new report Baltic M&A Monitor, published by Ellex, in association with Mergermarket. Deal volume across all three countries Estonia, Latvia and Lithuania countries have come out swinging at the beginning of 2017 - up 24 per cent year-on-year to 63 deals.

Value more modest

Value saw more modest growth, edging up slightly on 2015, increasing 17 per cent to €716 million over the same period. The number of domestic deals among the Baltic countries was up seven percentage points year-on-year, from 57 per cent in 2015 to 64 per cent in 2016.

Telecoms, tech and media growth

A number of sectors performed strongly in 2016. One of the highlights of the year was telecommunications, technology and media, which experienced a bounce in deal value in 2016. The Baltics are home to a number of innovative technology companies, strongly supported by their governments. At the same time, international technology firms are increasingly viewing the Baltics as an investment destination, largely thanks to the new e-residency programme in Estonia, enabling entrepreneurs to establish businesses in the country as if they were citizens, explained the report.

Energy, mining and utilities

Another major growth engine for Baltic M&A has been energy, mining and utilities. The report pointed out that was partially due to regulatory changes. Latvia is the last of the three countries to come in line with EU energy policy, separating generation and transmission. Interest in renewable assets is also driving activity, with a number of private equity (PE) exits in the sector.

GDP growth

This increase in deal making was supported by moderate GDP growth in all three Baltic countries. A European Commission report in February showed that GDP growth in 2016 was 1.1 per cent in Estonia, 1.6 per cent in Latvia and 2.2 per cent in Lithuania. Further, declines in unemployment and increased consumer confidence led to greater consumer spending, also helping to give dealmakers the will and the means to undertake transactions. Strong deal activity in the Nordic markets, with which the Baltics share close business ties, also helped spur deal activity in the region, concluded the report.