BALTIC M&A DEAL POINTS STUDY 2018

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1 BALTIC M&A DEAL POINTS STUDY

2 Baltic M&A Deal Points Study This fifth edition of the Baltic M&A Deal Points Study is conducted by the legal and regulatory committees and working groups of the: Estonian Private Equity and Venture Capital Association Latvian Private Equity and Venture Capital Association, and Lithuanian Private Equity and Venture Capital Association together with contributions from the following Baltic M&A law firms and alliances: 2

3 Transactions Analysed The study analyses 91 M&A transactions completed during the period January December This study compares the results to similar and studies. The transactions included in the survey have the following characteristics: The survey covered M&A and joint venture transactions, i.e. acquisition or merger of businesses via share or asset transactions, corporate statutory mergers, joint venture agreements or in any other way. Only Baltic transactions were studied, i.e. M&A transactions involving targets operating in one or more of the Baltic States: Estonia, Latvia and Lithuania. Transactions had a deal value over EUR 1 million and were completed during the two year period January December additional limitations applied as to deal value, the nature of the parties or the target or the sale procedure of the transaction. 3

4 Table of Contents The Parties 5 Sales Process and Form of Transaction 15 Transaction Value and Payment 19 Governing Law and Dispute Resolution 29 Representations and Warranties 34 Closing and Conditions Precedent 45 Liability and Indemnification 53 Joint Ventures and Shareholders Agreements 63 Covenants 67 Due Diligence 70 Duration of Transaction and Letters of Intent 73 Financing and Conditions Subsequent 77 4

5 The Parties General Transaction Characteristics

6 Country of the Target s Head Office United States 3% Other 6% Finland 2% Germany 1% UK 1% Other 4% Lithuania 35% Lithuania 23% Estonia 38% Estonia 31% Latvia 26% Latvia 30% Was the target distressed? 2% 98% Targets in the submitted transactions were predominantly Baltic, with Estonia providing 38% of them. Are the shares of the target publicly traded? 4% 96% 6

7 Baltic States Where the Target Operates 3% Estonia, Latvia Estonia, Latvia, Lithuania 28% Latvia, Lithuania 3% Lithuania 16% Estonia, Lithuania 1% Latvia & Lithuania 4% Estonia, Latvia & Lithuania 16% Estonia & Latvia 3% Latvia 22% Estonia & Lithuania 2% Lithuania 28% Estonia 25% Latvia 23% Estonia 26% Unlike previous periods, significant proportion of the transactions (28%) involve targets operating in all three Baltic countries. Targets geographical focus outside the Baltics includes Finland, Germany, Poland, United Kingdom, the United States and Russia. Energy and Utilities Services Retail / Wholesale Construction & Real Estate Financial Services Manufacturing Media & Entertainment Industrial Equipment Food Industry & Agriculture Logistics & Transport Pharmaceuticals Other Hotels & Restaurants Target s Main Industries 8% 7% 7% 6% 6% 6% 6% 4% 3% 2% 2% 12% 16% 7 7

8 Country of the Seller The Netherlands 2% USA 3% Sweden 3% The Netherlands 3% Lithuania 14% Other 12% Estonia 31% United States 2% Cyprus 2% Denmark 4% United Kingdom 4% Germany 4% Sweden 6% Other 10% Lithuania 23% Estonia 20% Finland 7% Latvia 16% Finland 15% Latvia 19% Similarly to all previous studies, the majority of the sellers are from Baltic states, whereas Estonian sellers comprise 31% and Finnish sellers (15%) are the main sellers outside of the Baltic countries. 8

9 Nature of the Seller Familycontrolled 9% Family-controlled 3% Individual person(s) 29% Other 2% Strategic 46% Individual person(s) 22% Financial/ Private Equity 20% Strategic 57% Financial/Private Equity 12% Over half of the sellers are strategic. Private equity exits constituted only 12% of the transactions. 9

10 Geography of Sellers and Targets Country of the Seller's group head office Country of the Target s head office: Estonia Latvia Lithuania Finland Netherlands Sweden United States Other Total Estonia Latvia Lithuania Finland 1 1 United States 3 3 Other 3 3 Total The seller s group head office and target s head office are mainly in the same country. 10

11 Country of the Buyer Luxembourg 3% France 3% Finland 6% Other 22% Estonia 22% Latvia 13% France 2% Austria 2% Poland 2% Luxemburg 2% Germany 2% Finland 3% Denmark 4% Russia 4% rway 4% USA 2% UK 5% Other 9% Sweden 7% Latvia 9% Estonia 23% Lithuania 19% Sweden 9% USA 10% Lithuania 12% The majority of buyers continue to be from the Baltic countries. However, the US buyers also stand out as a major investor. 11

12 Nature of the Buyer Individuals 4% Management buy-out 6% Management buy-out Individuals 3% 3% Familycontrolled 1% Financial/ Private Equity 16% Financial/ Private Equity 27% Strategic 66% Strategic 74% The proportion of the strategic buyer has increased and now comprises ¾ of all transactions. 12

13 Geography of Buyers and Targets Country of the Buyer s group head office Country of the Target s head office: Estonia Latvia Lithuania United States Sweden Finland France Luxembourg Other Total Estonia Latvia Lithuania United States Denmark 1 1 Finland 1 1 Japan 1 1 Switzerland 1 1 Total Most Baltic buyers acquired targets in their own countries. 13

14 Geography of Buyers and Sellers Country of the Seller s group head office Country of the Buyer s head office: Estonia Latvia Lithuania Finland Netherlands Sweden United States Other Total Estonia Latvia Lithuania United States Sweden Finland France Luxembourg Other Total As regards the origin of both buyers and sellers, intra-baltic M&A (both parties Baltic) was the most common with 32%. This was closely followed by foreign investors buying from local Baltic seller, which constituted 31% of all transactions (highlighted in green). In 14 transactions (16%) foreign sellers sold targets to Baltic buyers (highlighted in orange), almost three fifths of them to Estonian buyers. Targets changed hands among foreign parties in 20% of transactions. 14

15 Sales Process and Form of Transaction General Transaction Characteristics

16 Nature of the Sales Process Investment 1% Controlled auction 10% Takeover bid 1% Controlled auction 16% Other 2% Negotiated sale 82% Negotiated sale 88% Compared to last periods, controlled auctions have become even more rare and the proportion of negotiated sales is very high (88%). 16

17 Form of Transaction Combination of shares and assets 7% Assets 5% Other 3% Assets 5% Combination of shares and assets 5% Joint venture 5% Other 2% Shares 83% Shares 85% As in all previous studies, most transactions in the Baltics are share deals. 17

18 Timeline of Transactions The proportion of transactions submitted is greater towards the end of the period surveyed. This, however, does not necessarily show deal activity during the period. Number of transactions by closing date First Half Second Half 2017 First Half 2017 Second Half 18

19 Transaction Value and Payment General Transaction Characteristics

20 Transaction Value over EUR 100 million EUR million (4%) (8%) EUR million (10%) EUR million (2%) over EUR 100 million (7%) EUR million (6%) EUR 1-5 million (38%) EUR million (20%) EUR 5-10 million (18%) EUR 1-5 million (43%) EUR million (17%) EUR 5-10 million (27%) The value of a typical Baltic M&A deal remains in the EUR 1-5 million bracket, although the proportion of transactions in the 5-10 million bracket has increased

21 Distribution of Transaction Value by Buyer and Sales Process Nature of the Buyer Transaction value Strategic Financial/ Private Equity Individuals Management buy-out Total EUR 1-5 million EUR 5-10 million EUR million EUR million 5 5 EUR million over EUR 100 million Total Sales process Transaction value Negotiated sale Controlled auction Other Total EUR 1-5 million EUR 5-10 million EUR million EUR million EUR million over EUR 100 million Total

22 Form of Consideration Mixed (shares and cash) 2% All shares 2% Mixed (shares and cash) 5% All shares 2% All cash 93% All cash 96% Almost all transactions involve cash as consideration, in line with all previous studies. 22

23 Payment Terms Lump-sum payment, Earn-out 7% Payment deferral, Earn-out 3% Lump-sum payment, Payment deferral, Earn-out Other 2% 1% Payment deferral, Earn-out Earn-out 1% 5% Lump-sum payment, Earn-out 6% Lump-sum payment, Payment deferral, Earn-out 1% Other 1% Lump-sum payment, Payment deferral 10% Lump-sum payment, Payment deferral 11% Payment deferral 19% Lump-sum payment 56% Payment deferral 20% Lump-sum payment 57% Lump-sum payment is by far the most widely used form of payment in Baltic transactions. Incidence of each payment term Lump-sum payment 61% Payment deferral 29% Earn-out 10% 23

24 Payment Terms (cont) Percentage of price deferred (if deferred) Length of deferral Up to 5% 24% More than 5% up to 10% More than 10% up to 25% 12% 15% More than 18 months (27%) 3 months or less (21%) More than 25% up to 30% More than 30% up to 50% 3% 21% months (12%) 4-6 months (12%) More than 50% up to 60% More than 60% up to 75% 6% 9% 7-12 months (28%) More than 75% 9% Deferred payment proportions have slightly decreased, while deferral periods have stayed the same as in. Up to 5% more than 5% up to 10% more than 10% up to 25% more than 25% up to 30% more than 30% up to 50% more than 50% up to 60% more than 60% up to 75% more than 75% 6% 6% 6% 11% 13% 13% 21% 21% More than 18 months (27%) months (13%) 3 months or less (21%) 4-6 months (12%) 7-12 months (27%) 24

25 Price Adjustment at Closing, there is a price adjustment at closing 40% price adjustment at closing 60%, there is a price adjustment at closing 37% price adjustment at closing 63% Despite a slight increase in transactions with price adjustment, their number remains in the minority. 25

26 Price Adjustment at Closing (cont) If price adjustment was made, in whose favour? Buyer s favour 14% Buyer s favour/ Seller s favour 36% Seller s favour 50% Buyer s favour 53% Seller s favour 25% Buyer's favour/seller's favour 22% Compared to the study, there were significantly more cases were no adjustments were made. The most popular adjustment base is net debt and net working capital combined. Net debt & net working capital Net working capital Net debt Other Adjustment based on 24% 21% 15% 41% 26

27 Locked Box Mechanism Locked Box mechanism used Time between the locked box balance sheet date and the closing date, a locked box mechanism was used More than 9 months 28% 24% Up to 3 months 32% 72% 6 to 9 months 16%, locked box used 25% 3 to 6 months 28% More than 9 months 3% 75% 6 to 9 months 14% Similarly to the survey, about a quarter of transactions used a locked box mechanism. However, the locked box term increased significantly. 3 to 6 months 28% Up to 3 months 55% 27

28 Locked Box Mechanism (cont) Permitted leakage Payments in the ordinary course of business permitted leakage 13% 43% Payments in the ordinary course of business permitted leakage Dividends 16% 14% 70% Dividends 13% Shareholder loans Other 8% 8 % Shareholder loans 7% Other 23% Similarly to the survey, most mechanisms allowed only payments in the ordinary course of business as permitted leakage. Other leakage forms (dividends, shareholder loans) were seldom permitted. In less than a 10% of cases did the buyer pay interest from the locked box date until closing. 28

29 Governing Law and Dispute Resolution General Transaction Characteristics

30 Transaction Governing Law UK 6% Finland 4% Other 7% Estonia 33% Sweden 2% Denmark 2% UK 8% Other 4% Estonia 33% Latvia 27% Latvia 22% Lithuania 29% Lithuania 23% Most Baltic M&A transactions are governed by the local laws of the Baltic States. 30

31 Main Agreement Language Latvian 4% Lithuanian 7% Lithuanian 9% Latvian 4% Russian 3% Estonian 9% Estonian 7% English 77% English 80% As in previous studies, English is by far and increasingly the predominant language. 31

32 Dispute Resolution Mechanism Arbitration Estonian CCI 6% Arbitration Finland Central CC 8% Arbitration Stockholm CC 19% Other 5% Courts 42% Arbitration ICC 4% Arbitration - Estonian CCI 9% Arbitration Finland Central CC 2% Arbitration - London CIA 2% Other 5% Arbitration Stockholm CC 24% Arbitration Vilnius Court of Comm. Arb. 18% Courts 36% Arbitration Vilnius Court of Comm. Arb. 20% Arbitration is still the most popular form of dispute resolution, although there has been a slight increase in occasions where courts have been used as a dispute settlement venue. Vilnius Court of Commercial Arbitration continues to be the most reliable arbitration institution within the Baltic countries and Stockholm Chamber of Commerce is the most preferred choice outside Baltics. 32

33 Dispute Resolution: Existence of Disputes Did the transaction give rise to any disputes? 4% 6% 96% 94% The proportion of M&A disputes continues to be very small

34 Representations and Warranties

35 Seller s Representations and Warranties R&W 2% R&W 3% Limited R&W 21% Limited R&W 31% Extensive R&W 66% Extensive R&W 77% The proportion of transactions with limited warranties (i.e. only title and specific R&W) has slightly decreased compared with earlier surveys. 35

36 Seller s Representations and Warranties (cont) Do the seller s R&W include a general knowledge qualification? 49% 51% 47% 53% The proportion of transactions with a general knowledge qualification of the warranties has remained the same as in the survey. 36

37 Usage of Disclosure Letter 37% 37% 63% 63% The proportion of transactions using a disclosure letter has remained the same as in the survey. 37

38 Due Diligence Disclosures Considered General Qualification to R&W 32% 63% 37% 68% The trend of viewing due diligence as an alternative to R&W has continued. 38

39 Standard of Knowledge Definition of the seller s/target s knowledge Standard of knowledge 59% 41% Actual knowledge 44% Constructive knowledge 56% Other 4% 47% Constructive Actual knowledge 53% knowledge 49% 47% The seller s/target s knowledge is defined in more than half of transactions. The standard of knowledge continues to be almost equally divided between actual and constructive knowledge. 39

40 Title Warranties Does the seller give any title warranties? 1% 99% 100% In all transactions, title warranties were given by the seller with respect to title, ownership and encumbrance of the sales object. 40

41 Warranties: Accounting Standards Accounting standards used Both Local GAAP and IFRS 5% ne 2% Both local GAAP and IFRS IFRS 13% ne 5% Other 2% IFRS 19% Local GAAP 78% Local GAAP 74% Local accounting standards are still predominantly used in warranties. 41

42 Undisclosed Liabilities Warranty undisclosed liabilities warranty by the seller or target 32% 26% 68% 74% The proportion of deals using the no undisclosed liabilities warranty has increased steadily

43 Full Disclosure Warranty Full disclosure warranty by the seller or target 51% 49% 55% 45% The full disclosure warranty continues to be used in half of transactions. 43

44 Full Disclosure Warranty (cont) Is it knowledge qualified? 34% 56% 44% 66% The proportion of full disclosure warranty that is knowledge qualified has increased steadily. 44

45 Closing and Conditions Precedent

46 Timing of Signing and Closing Simultaneous signing and closing 19% Simultaneous signing and closing 18% Separate closing after signing 81% Separate closing after signing 82% As in the previous surveys, closing is deferred in the vast majority of the transactions analysed. 46

47 Closing Does closing or its date depend on fulfilling conditions precedent? 20% 19% 81% 80% In vast majority of transactions closing depends on fulfilment of conditions precedent. 47

48 Closing (cont) Is closing subject to accuracy of representations? Who may rely on the accuracy of representations? 45% Both Buyer and Seller 21% 55% 34% 66% Buyer 79% Buyer 46% Seller 6% Both Buyer and Seller 48% In most transactions closing is subject to accuracy of representations. Unlike earlier studies, in most cases only the buyer can rely on the accuracy of representations. 48

49 MAC ( material adverse change )/ MAE ( material adverse effect ) Clause 51% 49% 51% 49% MAC clauses, which make closing conditional upon nothing material changing for the worse, are used in half of the deals similarly to. 49

50 MAC ( material adverse change )/ MAE ( material adverse effect ) Clause (cont) Who may invoke the MAC clause? Both 13% Seller 2% Both 29% Seller 5% Buyer 66% Buyer 85% The buyer continues to be the main party who may invoke the MAC/MAE clause. 50

51 Competition Clearance Did the transaction require approval by the competition authorities?, Latvian 12%, other, Latvian 2% 7%, Lithuanian 14%, Lithuanian 21%, Estonian 14% 60%, Estonian 13% 57% The proportion of transactions subject to competition authority approval has remained about the same in all studies. 51

52 Long-Stop Date Was a long-stop date used?, 2 to 5 months after signing (31%), over 5 months after signing (12%) (34%), less than 2 months after signing (23%), over 5 months after signing (22%), 2 to 5 months after signing (34%) (33%), less than 2 months after signing (11%) Is there a break fee or exit penalty? Use of a long-stop date has remained quite similar across all studies. The 2-5 month long-stop date continues to be the most popular term. 75% of transactions analysed imposed a break fee or exit penalty (compared to 41% in ). 25% 75% 52

53 Liability and Indemnification

54 Survival of Warranties Was there a general survival period of warranties? How long was the survival period of warranties? (regular statute of limitations) 18% 7-12 months months 20% 26% months 32% months 9% 82% More than 48 months Other 4% 8% (regular statute of limitations) 29% 71% An increase has occurred in setting explicit general survival periods for R&W compared to the study. Up to 6 months 7-12 months months months months More than 36 months Other 4% 7% 7% 4% 5% 16% 23% 54

55 Survival of Warranties Carve-Outs Carve-outs to time limitations 36% 29% 71% % of positive responses with specific carve-outs 64% Title warranties 29% 61% 62% The use of carve-outs continues to be popular. Title warranties, taxes and intentional breach are the most common carve-outs. Taxes Intentional breach Environmental Other 19% 11% 9% 9% 18% 14% 7% 29% 43% 36% 40% 77% 55 55

56 Baskets and Thresholds Baskets, de minimis or thresholds for asserting claims under the warranties? 23% 24% 76% 77% First dollar threshold 85% Compared to the study, the use of baskets/thresholds has remained the same. Typically, baskets/thresholds in the Baltics are first dollar, as has been the case in all studies. Deductible/excess only 15% 56 56

57 Baskets and Thresholds (cont) Amount of threshold per claim Less than 0.5% of the purchase price 82% Less than 0.5% of the purchase price 79% 0.5-1% of the purchase price 11% 0.5-1% of the purchase price 12% 1-2% of the purchase price More than 2% of the purchase price 5% 2% 1-2% of the purchase price More than 2% of the purchase price 4% 6% Amount of basket/threshold for the aggregate of all claims Less than 0.5% of the purchase price 0.5-1% of the purchase price 1-2% of the purchase price 2-3% of the purchase price 3-5% of the purchase price More than 5% of the purchase price 3% 5% 8% 27% 26% 32% Less than 0.5% of the purchase 1-2% of the purchase price 0.5-1% of the purchase price 2-3% of the purchase price More than 5% of the purchase 3-5% of the purchase price 7% 9% 11% 19% 21% 33% Typically, the threshold is less than 0.5% of the purchase price per claim. The thresholds continue to be progressively lower. The amounts of basket/thresholds for the aggregate of all claims have risen in comparison to. The most widely used amount of basket/threshold for the aggregate of all claims is 1-2% of the purchase price. 57

58 Overall Cap or Ceiling on Liability Is the seller s liability for breach of warranties limited to a maximum total amount? 16% 22% 78% 84% The proportion of transactions with an overall cap on the seller s liability continues to increase. 58

59 Amount of Cap on Liability 40% Cap Amount % of transactions 33% 28% 29% 28% 20% 23% 25% 19% 4% 1% 2% 11% 8% 8% 5% 10% 8% 100% of purchase price % of purchase price 50-75% of purchase price 25-50% of purchase price Less than 25% of purchase price Other Although caps set at 100% of the purchase price continue to be common, the proportion of caps set at 25-50% has increased. 59

60 Sandbagging Provisions limiting the buyer s remedies if the buyer has pre-existing knowledge of breach of warranties Pro-sand-bagging clause 5% Other 2% Pro-sandbagging clause 2% Anti-sandbagging clause 37% Agreement silent on sandbagging 61% Anti-sandbagging clause 31% Agreeme nt is silent on sandbagging 62% As in previous studies, the majority of Baltic transactions do not contain sandbagging clauses. However, the trend for explicitly dealing with sandbagging is rising, with 37% of transactions including an anti-sandbagging clause, up from 20% in the study. 60

61 Security for Seller s Obligations 32% 34% 66% 68% Form of security of seller's obligation 48% Escrow account 42% 39% Deferred payment 31% 41% 39% Parent s company guarantee 10% 13% 14% A third of transactions established a form of security, in line with previous studies. The most popular forms of security continue to be escrow accounts and deferred payment. Bank guarantee Other 3% 2% 4% 10,00% 13% 11% 61

62 R&W Insurance buy-side 1% Was any R&W insurance used in the transaction? What kind (sell-side or buy-side)? sell-side 1% sell-side 2% 98% 98% As in, the use of R&W insurance is not yet common. R&W insurance was used in only 2 transactions. 62

63 Joint Ventures and Shareholders Agreements

64 Shareholders Agreements (SHA) Is there a shareholders agreement signed between the parties? 21% 24% 79% 76% The surveyed deals involved agreements between shareholders in 24% of cases

65 Shareholders Agreements (SHA) (cont) SHA Governing Law Other 6% Estonian law 39% UK law 16% Lithuanian law 25% Estonian law 31% Latvian law 22% Lithuanian law 50% Latvian law 11% Compared to previous studies, shareholders agreements have only used local laws as governing law

66 Shareholders Agreements (SHA) (cont) Provisions included in the SHA Restriction to encumber the shares 88% 91% 95% Restriction to sell the shares 89% 88% 91% Tag along right 63% 72% 79% First refusal or pre-emptive rights 74% 88% 94% Veto rights 74% 81% 88% Access to all the Target information 74% 75% Unanimity requirement 56% 63% 69% Drag along right 53% 56% 63% Call option 50% 47% 63% Change of control of the shareholder 41% 47% 63% Put option 31% 37% 41% Deadlock 26% 28% 41% Exit clause(s) 21% 41% 31% 66 66

67 Covenants

68 Seller s n-solicitation Obligation Agreement imposing a non-competition obligation on the seller Duration of such obligation Other 8% Up to 12 months months 2% 6% 53% 47% months months 33% 49% More than half of transactions included a non-competition obligation for sellers. The non-compete duration has remained similar to, where the most used duration was months, followed by months. 51% 49% 68

69 Seller s n-solicitation Obligation (cont) Agreement imposing a non-solicitation obligation on the seller Duration of such obligation Other 7% months Up to 12 months 4% 11% 51% 49% months months 35% 43% 43% Almost half of transactions impose a non-solicitation obligation on the seller. The typical duration of the obligation is months, which is the same as in the study, followed by months. 57% 69

70 Due Diligence

71 Due Diligence Was the due diligence conducted by the buyer? 15% 21% 79% 85% Types of buyer due diligence performed Legal due diligence 80% Financial due diligence 62% In line with previous studies, buyers conducted due diligence exercises in the vast majority of cases. Legal and financial continue to be the most popular types of due diligence performed. Business due diligence Technical due diligence Tax due diligence 2% 35% 31% 71 71

72 Due Diligence (cont) Was a vendor s due diligence conducted? 7% 13% 87% 93% While buyers routinely carry out a target due diligence, vendor s due diligence is still rare in the Baltic States. 72

73 Duration of Transaction and Letters of Intent

74 Use of Letters of Intent Were the initial negotiations formalised by signing a letter of intent? 55% 45% 56% 44% More than half of transactions in the Baltics were formalised in the negotiations stage by a letter of intent. 74

75 Duration of the Transaction Less than 1 month (1%) More than 12 months (14%) 1-3 months (16%) More than 12 months (10%) 1-3 months (19%) 6-12 months (27%) 6-12 months (33%) 3-6 months (43%) 3-6 months (37%) As in previous studies, the majority (70%) of transactions take between 3 and 12 months from letter of intent or due diligence to closing. 75

76 Transaction Bonus Were target managers granted any transaction bonuses? Similarly to, only 10% of transactions reported using transaction bonuses. sellside 10% The number may be affected by underreporting, as deals were submitted by counsel to one of the parties, who may not have known of a bonus being paid by the counterparty. 90% sell- side 9% buyside 1% 90% 76

77 Financing and Conditions Subsequent

78 Financing Was the transaction related to acquisition financing or refinancing of the business? We introduced a new question, asking whether the transaction involved financing or refinancing of the business. 18% of the transactions involved financing. 18% 82% 78

79 Conditions Subsequent We introduced a new question, asking whether the transaction contained any conditions subsequent and if the conditions subsequent were used because of a need to close the transaction fast. The majority of transactions did not use conditions subsequent. Also, the main reason for using conditions subsequent was not the need to close the transaction fast. Did the transaction contain any conditions subsequent? 28% 72% Were conditions subsequent used to close the transaction fast? 72% 28% 79

80 Final Remarks The survey analysed 91 M&A transactions. In -2017, the most active economic sectors in the Baltic M&A market were Technology, Energy and Utilities, Services, Retail/Wholesale and Financial Services. Compared to previous periods, there are no major changes as to whether foreign or local shareholders are selling businesses in the Baltics. Although transaction values vary greatly, the value of most typical Baltic M&A transaction remains in the EUR 1-5 million bracket. It can be generalised that Baltic M&A counterparties are becoming more sophisticated in the use of internationally acknowledged transaction tools, such as price adjustments, MAC clauses, liability limitations (warranty limitation periods, overall caps, claim baskets and thresholds). However, R&W insurance is still very seldom used in Baltic M&A transactions. 80

81 CONTACTS FOR MORE INFORMATION, PLEASE CONTACT MEMBERS OF THE WORKING GROUP: ESTONIA LATVIA LITHUANIA Toomas Prangli Jānis Bite Sergej Butov Peeter Kutman Guntars Zile Juozas Rimas Sven Papp Raimonds Slaidiņš Paulius Gruodis Maivi Ots Maris Vainovskis Rimtis Puisys Kadri Kallas Andra Rubene Marius Matonis