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Several Estonian tech companies may be due for an exit

The technology sector is going through a phase where capital is on hold and investors are waiting for the right time.

The year 2022 was challenging for the companies in the technology sector, in spite of extremely successful and record-breaking fund-raising. The highlights were record funding of Bolt and the fact that Estonia has now two more unicorns - Veriff and Glia. The number of acquisitions and IPOs of Estonian-related tech companies remained at the level of 2020 and 2021, i.e. less than ten transactions per year. However, in terms of the total volume of transactions there was a significant drop. According to compiled by Prudentia Advisory and Siena Secondary Fund, the total value of the companies ranked in 2022 remained at the same level as in the previous year.

Although the information on all transactions is not public, we can still derive possible transaction prices. The estimated amount of transactions remained below 100 million euros in 2022, compared to 1.6 billion euros in 2020 when the biggest deal was the exit of Pipedrive valued at 1.3 billion euros. In addition, the higher-value transactions included exits of Coolbet, Drops and Fortumo valued respectively at 149 million, 42 million and 40 million euros. In 2021, the transaction volume was the highest ever, largely due to the listing of Wise on the London Stock Exchange that was valued at 11.4 billion euros on the opening day. The most notable exit in 2021 was the sale of Icefire to

So 2022 brought no megadeals, and the biggest exit was probably the sale of Brainbase which according to 2021 data from Toptech was valued at 64 million euros. The majority stake in Adcash, whose last fundraising took place in 2015, was sold in the autumn, but the company has not shown high growth rates since then. It can therefore be assumed that the exit took place on a significantly lower level than the company’s value at the time.

In 2022, three new technology companies were added to the list of First North Nasdaq Tallinn. They were Clevon (who has announced by now that it is preparing to delist), Punktid Technologies and Robus Group. As a reminder, in 2021 four Estonian tech companies were listed on First North: Modera, Elmo Rent, Bercmann Technologies and Text Magic, in addition to the abovementioned listing of Wise on the London Stock Exchange.

Quo vadis?

A comparison of the number of exits in the tech sector with the amount of funds raised shows a major difference, according to the data of the Founders' Association for 2020-22: while there were an average of 80 fundraisings each year, the volume grew from 464 million to 963 million and then to 1.3 billion euros a year. Hundreds of companies that investors have invested in over the years are a breeding ground for future exits and IPOs. Transactions for 2023 and subsequent years should be seen in these lists. While Bolt IPO would hardly be a surprise to anyone, there could be news about the sale of some successful SaaS companies soon.

Mid-2022 was characterised by a decline in the share prices of global tech companies, which has been also affecting possible IPOs and exits of Estonian companies. This may also erode the value of SaaS companies that are very attractive acquisition targets. About a dozen SaaS companies have been listed on Scandinavian stock exchanges, the value of which has fallen at least twice since the beginning of 2022. At the same time the financial indicators of the companies have not deteriorated - on the contrary, most of them including Cint Group, LeadDesk and Admicom have seen an increase in both revenue and profit.

Such a collapse in corporate value will certainly affect the transaction market in 2023.

At present owners of profitable companies are not interested in exiting and prefer to wait for prices to recover. At the same time, corporate values may not reach the level of 2021 any time soon.

If you take a look at the list of TopTech, the ranking of Estonia’s most valuable tech companies, one can find several companies that may be thinking about IPOs or potential exits. There are buyers in the form of large international investment firms as well as local investors. Financial resources are also available. As soon as sellers agree to lower their asking prices and buyers become a little hungrier, we should be hearing about transaction news.


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