Following a raft of consolidation, the biggest players in the Baltics are experiencing a much more settled market
Baltic firms have experienced their fair share of consolidation over the past couple of years, creating a clear breakaway of four significantly sized firms for a relatively small legal market: Sorainen, Cobalt, Ellex and the recently rebranded TGS Baltic (previously Tark Grunte Sutkiene), following its merger with Varul Estonia.
As a result, the Baltic market in 2017 is much more settled, against the backdrop of a favourable increase in GDP forecasted for all individual countries in the region (Lithuania 2.6%; Latvia 3.5% and Estonia 2.4%).
‘The Baltic market is developing pretty well,’ says Laimonas Skibarka, co-managing partner of Sorainen, which has remained an independent firm. ‘The changes in alliances have finally settled. There are no big changes this year, which is good. The consolidation is good for the market as we see it. It has helped us grow and it has helped this market to develop. There is now more competition in terms of quality, focus on clients, client satisfaction and specialisation in business sectors, not just legal areas.’
However, despite combinations between law firms in the region having considerably slowed, clear consolidation in the banking, retail and the communications, media and technology sectors has given rise to plenty of M&A activity for those firms.
‘The M&A market boomed dramatically,’ says Rolandas Valiūnas, managing partner of Ellex Valiunas. ‘There were a huge number of transactions compared to a few years ago, especially in the technology, media and communications market, which also drove work for regulatory groups.’
2016 saw Nordea, the largest financial services group in northern Europe, combine operations with DNB in Estonia, Latvia and Lithuania in the largest merger in the Baltics to date to create the leading main bank in the region, with a total of €13bn in assets, while the acquisition of retail chain IKI by Rimi (The ICA Group) was the largest acquisition in the Baltics in 2016 with a deal value of €213m. The largest deal in the technology sector was the recently announced acquisition of Modern Times Group’s Baltic business by Providence Equity Partners for €115m.
According to data from Mergermarket, there were 64 deals in 2016 in the Baltic region, with a combined value of €715m. And 2017 is already expected to be stronger, with 15 deals and a total value of €452m reached in the first four months of this year.
However, Eugenija Sutkienė, managing partner of TGS Baltic, is concerned that demand for legal services is in steady decline in the region. ‘At the moment we maintain normal, good profitability. But we are worried because our clients in the public and private sectors now require large in-house teams and buy [fewer] services. The commoditisation process is noticeable in our market.’
And while some Baltic players have enjoyed a strong year in traditional sectors such as litigation, corporate, real estate, tax and banking, the Baltic markets and Lithuania in particular are also looking to capitalise on the fast-growth fintech arena – a trend bolstered by Brexit and the number of start-ups now looking for a European base outside London.
‘The Baltic states, and especially Lithuania, have been very active in fintech,’ says Skibarka. ‘Lithuania and our firm took this as a focus area and organised various initiatives to help develop this market to adopt new laws on peer-to-peer lending, the law on crowdfunding etc, and we co-operate with the Bank of Lithuania and others to attract fintech companies to Lithuania.’ LB
kathryn.mccann@legalease.co.uk
| Firm | Total lawyers | Total partners | No. of offices |
| Cobalt | 180 | 32 | 4 |
| Ellex | 178 | 39 | 3 |
| Sorainen | 170 | 28 | 4 |
| TGS Baltic | 140 | 22 | 3 |