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20 years of experience in advising M&A transactions

This year marks its 20th anniversary Investment Agency OÜ, whose service portfolio was wide and diverse in the early years, but who for the past six to seven years has specialized in narrow business – organizing the sales process of the company. 

Investment Agency OÜ's, that has been operating since 1998, main field of activity is organizing the sales process and successful sale of the Estonian companies, working closely with the co-partners and co-operation networks in Finland, Sweden, Latvia, Lithuania and Russia.

In addition to its current activity, Investment Agency OÜ has previously also provided professional service to involve loan capital, compile valuation analysis of companies, corporate restructuring and, in a couple of cases, the management of companies.

According to Illar Kaasik, the leading partner and member of the management board of Investment Agency OÜ, focusing on a specific field was the company’s strategic decision, which gives them business advantage in the future. „Focusing on a specific field enables us to provide more professional service. Our main goal is to offer just one product and do it very well,“ Kaasik justifies the change of direction.

In the early years, the company was also involved in development of real estate, which, however, was merged with their subsidiary company Investment Agency Property Advisor OÜ. This is managed by Investment Agency OÜ’s long-term partner and member of management board Mart Lee.

Main goal is to achieve the highest possible price

Although the goal is usually to reach the successful completion of the sales transaction in six to eight months, then in reality the sales process of the company takes about one year. There are, however, transactions that have taken up to two or three years. „Since the contracts are long, it takes a lot of trust between client and advisor. It is extremely neccessary that the advisor understands the company’s business specification, sale opportunities and who might be the best buyer,“ says Kaasik. 

Kaasik continues by stating that the main goal is always achieving the highest price possible. „The advisor must understand which company is the best buyer for our client in a specific market phase. When economy grows, it may be investment fund, but during recession it may be a competitor.“
According to the leading partner, advising M&A transactions is interesting on one hand but on the other, complicated, because different economic fields have to be dealt with. „Our clients are, among others, from the dairy, metal processing, retail and hotel sectors, which means that we have to educate ourselves constantly and fully understand the specifics of the field, because that’s the only way we can do our job very well,“ marks Kaasik, adding that volatile business envoironment also complicates the work.

He brings an example that during recession, companies’ true values and the owners' expectations may be in a strong shift.
According to Kaasik, the knowledge of the economic envoironment and organizing the company’s sales process around it is part of advisor’s professionality and competence. „Successful sale of the company always starts with the right sales strategy, during which various actions are analysed and hence effective sales tactics are planned.“

„It’s important to understand the company’s value for the owner. For example, for a company worth a total of ten million euros, every 1% equals with 100 000 euros. While doing my job, I definitely take it into consideration and put myself in the owner’s shoes in order to achieve the best result,“ Kaasik adds.
According to associate Sulev Raik, who joined the company in 2017, a specialist can manage two to four mandates at the same time. When it comes to bigger transactions, there can be only one or two projects at the time. „The most important keyword is confidentiality,“ Raik says. „Negotiations process and tactics also matter, for example during price negotiations, you have to know for sure when to play which card.“

The most important asset is employees

Since M&A field is simultaneously interesting and complicated, partners with lots of experience and talented, motivated employees are the company’s biggest capital. Partners of Investment Agency OÜ are specialists with a lot of experience, who manage and are responsible for sales or purchase mandate from the beginning to the end. Recently, Indrek Orav joined the circle of partners, who has by previous work experience been, among others, involved with Danish Investment Fund of Middle and Eastern Europe. He has long-term experience as a negotiations instructor and advisor.

In order to see the work from a new angle and give it a deeper meaning, the team attends seminars and trainings together. Twice a year the team does something adventurous together, for example recently they played curling and golf’s charms were introduced to new colleagues. 

„Joint event at the end of the year has become a tradition, birthdays and other personal life events are celebrated together in the office,“ Investment Agency OÜ’s communications manager Eva-Ell Paalimaa is pleased.

According to the company’s partner Indrek Uudeküll, there are eight people currently working in the office of Investment Agency OÜ: five partners, two analysts and communications manager. „It is common that the proportion of partners is so big in this kind of company. Nearby, M&A boutique with eight employees is a medium-sized company in its field of activity,“ Uudeküll adds.

Mission is to merge Baltic’s and Scandinavian economic space

Kaasik states that the owners want to sell their company in three cases: the owner wants an exit from the business activity due to age; business activity has reached its peak, the owner has other plans and needs more capital; the owner needs extra capital, selling only a part of the company.

„If the owner’s descendants are not interested in continuing on with the business, it is reasonable to sell the company to a new owner, who has a vision and capability to carry on the business. Otherwise, the company would stay enervated," adds Raik, pointing out that M&A transactions also enliven the economy.
The biggest transaction for Investment Agency OÜ in 2017 was the sale of AS Remeksi Keskus, with its equity worth eight million euros, by advising shareholders of AS Remeksi Keskus while selling the company to Lithuanian enterprise AXIOMA LT UAB.

„Our mission is to merge Baltic economic space. If we can sell companies from Estonia, Latvia and Lithuania that operate in the same field, by finding new owner such as a German, Swedish or local investor, then we actually consolidate the economy and change it to be more competitive and effective,“ marks Kaasik. „This type of transactions are always complicated, because several different parties need to be tied and specificity of legislation of three countries needs to be taken into account.“

Outlook for year 2018 is, according to Kaasik, optimistic and transaction boom continues. „Economic envoironment favours it: the cost of money is cheap, there has been economic growth in neighboring countries. Finland has come out of the crisis, Latvia and Lithuania have shown good results, Russia is also doing better. Overall it forms an envoironment where companies’ values are growing and they have free capital and interest in investing and growth. All of that enables us to help our clients carry out more transactions.“

The article was published in the February issue of Äripäev Jubilary