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Ceturtdiena 22.02.2018 | Name days: Rigonda, Adrians, Ārija
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Coface: investors don't find it interesting in Latvia

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Baltic news, News from Latvia, BNN-NEWS.COM, BNN-NEWS.RU

Sandra Smiltniece

Currently much attention is paid to sale of important and successful state-owned companies, although it is exactly inefficient companies whose sale should be considered, Dainis Gaspuitis, SEB bank economist, told in an interview to the news portal BNN.

Given that the state of Latvia holds shares in one and a half companies, while being the sole owner in 70 businesses, it is most crucial to asses performance of inefficient companies. The state needs to maintain control in companies that are strategically important for efficient economic performance and sustainable growth. It simply cannot perform equally successfully in all sectors due to its limited capacity and knowledge, according to Gasputis’ comment on Ernst & Young study Return to Warmer Waters – How do Private Equity Investors Create Value?

These studies show that investors are interested in shares that are not traded publicly. This is important also for Latvia since it and also private persons own capital, which it is planned to sell on the international market, says Guntars Krols, Ernst & Young partner.

Gaspuitis points out that it is crucial for Latvia to attract invetsments directed towards rebuilding the economic structure and boosting economic growth. “However, for investors to decide for placing funds, certain measures have to be taken for the state to emerge as investment friendly. International and inter-regional competition for investments will grow fiercer, so it is important not to lose in this competition. What I mean here is tax and fiscal policy, efficient judicial system, proper infrastructure as well as active addressing of potential investors,” he says.

“Great uncertainty prevails in the global economy. Problems can linger yet for many years ahead. This is also playing a role in investment strategies. Just like states, also private investors are selling their equity to sort out financial issues,” Gaspuitis indicates.

While Sandra Smiltniece, head of Coface Latvia Sales department, told in an interview to BNN that she cannot relate to the statement that disadvantageous time for selling public and private companies is past already.

“Given the economic trends in the eurozone as well as double recession expectations, I do not think that this is the right moment to sell state-owned companies. Before the crisis, the focus was on making profit speculatively, while now the main thing is what is beneficial for investors,” she says, stressing that 2011 is definitely not the best time to sell businesses.

She adds that 2012 could bring a better situation, however, also 2010 was expected to be better than it actually turned out to be. According to her, certain improvements could be expected only in the second half of the next year.

Asked whether greater investors’ interest is forecast, Smiltniece points out that there has always been interest from their part. The only thing that has changed is the focus – from speculative transactions to business. “Moreover, we should also bear in mind that Latvian businessmen are pretty choosy. Upon attracting an investor, they often give preference to national interests or other circumstances. Investors do not find it interesting in Latvia, because we ourselves do not know what we want. Meanwhile, they also need to think of where to place funds so that they can break even and be sustainable. It is something that is no longer possible in the real estate sector,” she says.

According to her, the change of the govenrment and the crisis expectations are definitely not promoting investment attraction.

Two separate annual Ernst & Young studies (How do private equity investors create value? and Return to warmer waters) conducted in Europe and North America’s private equity markets show that private capital was sold more in 2010 versus two previous years. Both Europe and the U.S. show that in 2010 investors were much interested in shares of companies that are not listed, because they often show good financial performance and adapt to the recession successfully.

The results of the studies mean that 2010 saw more active selling of unlisted companies’ shares and stock. Sale transactions of private equity companies grew to 118 compared to 51 in 2008 and 76 in 2009. The most successful sectors were telecommunications, followed by health care, industry and technologies.

57 private equity companies were sold in Europe last year, which is much more than in 2008 and 2009 with slightly more than 30 transactions. One of the key factors for this was that 11 European companies were sold once they announced initial public offering. It was the highest number since 2006.

“However, despite the activity is bigger, economic uncertainty accompanied with double recession threat and public markets instability can endanger it. International companies have not yet entirely returned to taking over and merging despite they have accumulated significant reserves,” Krols says.


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