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Tuesday 17.07.2018 | Name days: Aleksejs, Aleksis

KPMG: it will be even harder for Russian investors to do business in Latvia

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUVery optimistic trends are currently noted in the global merge and acquisition segment – not only does different companies’ readiness for new deals gradually increase, but so does their financial ability to realize new business deals in the future.

Lately, there has been increased interest from American investors toward Latvian companies, especially in the field of IT and new technologies. However, because of the decline of Russian rouble’s value, it is expected that the ability of Russian investors to carry out business transactions will reduce as well, as concluded by KPMG in the Global M&A Predictor survey.

«Looking at world trends and the situation in Baltic States in general, it can be predicted that M&A activity will increase in Latvia in 2015. Up until now, business deals that allowed foreign companies to acquire shares in local companies formed less than half of all M&A activity in Baltic States. Nevertheless, this proportion could change under current market conditions, because Baltic States are currently some of the most rapidly developing economies among European member states. I would not come as a surprise if American companies bought several companies in Baltic States, because rates of economic recovery in USA are rapid and stock market indexes are as high as they have ever been. Nevertheless, one of the more limiting factors is the size of the Baltic market. In order to become attractive to investors, Baltic companies have to be major players on the local market and be prepared to work globally or offer unique products or technologies,» – comments KPMG Baltics business deals support department Director Jūlija Māsāne-Ose.

«It is expected that business deal activities will be affected by conditions specific to Latvia in 2015. The geopolitical situation could contribute to consolidation of the local market and increase the number of local business deals. Food products producers, who are largely dependent on exports to Russia, could consider the possibility of consolidating their activities. At the same time, investors from Russia, who have always been active in Latvia, will have a tougher time carrying out business deals in Latvia. Consolidation options will likely remain in other industries with relatively low concentration. This includes, IT and telecommunications, medicine distribution and construction,» – adds Māsāne-Ose.

Two other trends that prove positive development of M&A market are mentioned in the survey. First of all, it should be said that price and revenue proportion of companies featured on stock markets in the world is 7% higher than it had been twelve months ago, which means that these companies’ preparedness to carry out business deals is currently on a rise. Secondly, it is expected that the predicted net debt proportion in relation to EBITDA, which is used by KPMG in order to assess companies’ ability to perform business deals, is expected to decline by 14% in the next 12 months.

The largest increase in the volume of business deals is expected to occur within the segment of technology companies. A decline is expected within energy industry. 2014 was very successful for investments in technological companies in Latvia. Investments were provided to Latvian companies like Infogram, Cobook, Mailigen and Roamer.

The controversial social network, which currently has approximately 180 million users, has been acquired by IAC. Infogram managed to acquire Brazilian Visualoop company, which allowed the company to expand its global presence and become one of the few Latvian companies that had performed investments in foreign countries in 2014. It is expected that optimistic trends set in 2014 will continue in 2015 as well.


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