The 20th jubilee year seminar of Investment Agency took place on the 11th of October in Estonian Chamber of Commerce and Industry and had a focus on whether currently is a favourable time to sell a company. The seminar was moderated by Marko Reikop and the speakers were Illar Kaasik, Tõnis Tamme, Vallot Mangus, Vahur Vallistu and Eva-Maria Kangro.
The presentation of Investment Agency’s managing partner Illar Kaasik reflected the impact of various stimulants on the values of companies in the economic environment. The EU Central Banks’ asset purchase programme of recent years has supported the economic growth. The programme is expected to end at the end of 2018 or at the beginning of 2019. The programme worth nearly 2.6 trillion euros has helped the economic growth of the EU area to take off. Low interest rates have had a positive impact on the economy as well.
The largest planned infrastructure project is certainly Rail Baltic with a predicted cost of 1.6 billion euros. In construction phase it will definitely have a positive impact on the construction sector, but it must be taken into account that after the project is done the construction sector has to adjust to the new situation. Large-scale investments always bring up lively debates in the society and increase our visibility in the eyes of the foreign partners. Rail Baltic has already brought more than 50 million euros of direct investments into Estonian private sector, such as the sale of Trev-2 to Eurovia and sale of Transiidikeskus to Hamburger Hafen und Logistik AG.
Larger infrastructure projects also include Balticconnector, Estlink and the development of Estonian broadband infrastructure network (EstWin). Those infrastructure investments provide Estonian economy with better access to electricity and gas markets and improve availability of access to fast internet. In the presentation the impact of infrastructure investments to various economic sectors was also analysed.
Triniti law firm’s partner Tõnis Tamme spoke about the preparation for the transaction. In order a transaction to be successful it is important for both the buyer and seller to do their homework. His advice is to involve an adviser to the process, despite the company is big or small. It is important to “organize the home” while preparing for a transaction, because the way to do things often seems logical and understandable to the seller, but not so much for the buyer coming from the outside.
One of the major shareholders of TMB Vallot Mangus made his presentation about how Tartu Maja, which was established in 1961, grew over the years to become an international producer of concrete products, AS TMB, and won the Äripäev’s TOP of producers of building materials in 2018. In 2017, TMB revenue and operating profit reached 124 and 17,9 million euros respectively. Since 90s a lot has happened: privatization of the company in 1994, MBO (management buyout) in 2012, acquisition of a larger Finnish competitor Betonimestarit OY in 2016 and sale of the company to one of the biggest producers of concrete products in Europe, Consolis Group in 2018. In order to be successful, the company needs to constantly innovate and the entrepreneur must develop and adapt to new circumstances.
Project financing department’s project manager in Swedbank Vahur Vallistu gave an overview on how and on what conditions the bank finances acquisition transactions. The clients who need funds to finance their purchase turn to them. He recommended using advisers’ help while financing the buyouts since in their practice there have been cases where the “earn-out” agreements haven’t been met. He shared a message that economy is currently doing well and has been growing for five straight years.
Psychology doctor and coach of agile leadership Eva-Maria Kangro’s presentation focused on the psychological processes happening in the entrepreneur’s mind if the decision to sell a company has been made or is in condsideration. A catchy thought about her presentation was that the people who haven’t commited themselves to a company A for life in their mind but have other hobbies and rewarding relationships are in advantage.
In a panel discussion, the thoughts on the crisis were split – in the opinion of Tõnis Tamme the crisis is already here in certain sectors, for instance in a service sector there are not enough employees and the same goes for schools and restaurants. Vahur Vallistu believes that there is always crisis somewhere and when compared to years 2007-2008 where just a few were doing good, then currently many are doing well - for one there is a wide choice of restaurants. According to Vallot Mangus there is a shortage of talents in lots of areas, but the only thing being talked about is bringing back talents in the context of IT and culture. Talents are looking for attractive employers since they consider themselves attractive.
At the end of the seminar day Marko Reikop asked the speakers a question – Is today a good time to sell a company?
Eva-Maria Kangro – yes, if it is your carefully considered decision. Vahur Vallistu thought that it is a good time to sell because the economy is doing well at this moment. Illar Kaasik – if the company has a 5-year or longer development plan then the sale is not even an option, but if it doesn’t exist then it would be reasonable to consider the idea of sale since the economic environment seems to have reached the end of its growth phase.
Eva-Ell Paalimaa, Investment Agency Communication manager