Category: Lithuania

Ellex Valiunas has successfully represented Neringa Dangvyde Macate before the European Court of Human Rights, on a pro bono basis, in a dispute related to restrictions on the distribution of Dangvyde Macate’s fairy tale book, Amber Heart, depicting same-sex relationships and its subsequent labeling as harmful to children under the age of 14.

“The book contains stories about various groups experiencing social exclusion and discrimination – the disabled, emigrants, homosexuals, and people with skin color different from the majority, Roma, etc,” Ellex informed, adding that its distribution “was limited due to the content of several tales depicting same-sex relationships.”

According to the firm, the court found that such distribution restriction constitutes discrimination based on sexual orientation and violates freedom of expression enshrined in Article 10 of the European Convention of Human Rights.

“The court concluded that the author’s book was illegally removed from the market,” Ellex reported, as “information cannot be considered harmful simply because it contains information about same-sex relationships. The court indicated that such a ban is not justified – the dissemination of information about same-sex relationships just expresses respect for models of same-sex relationships and promotes tolerance.”

“We dedicate the case to the memory of the author,” the firm announced.

The Ellex Valiunas team included former Partner Vytautas Mizaras and Senior Associate Marijus Dingilevskis.

Sorainen has advised Oxipit on a EUR 3.5 million investment from Taiwanese venture capital company Taiwania Capital. Walless advised Taiwania.

According to Sorainen, “the Taiwanese investment fund Taiwania Capital is one of Taiwan’s measures to develop economic relations with Lithuania, following economic pressure from China. The finances are dedicated to creating joint ventures, investment projects, and start-ups in the field of high technology: for semiconductors, lasers, and biotechnologies.”

Oxipit is a Lithuanian computer vision software start-up specializing in medical imaging.

“Last year, we received regulatory approval to use artificial intelligence to provide radiologists’ findings without needing a doctor,” Oxipit CEO Gediminas Peksys commented. “The product is highly accurate and has undergone clinical trials in many countries. This investment will allow us to expand the team, the number of clients, and the company’s overall growth.”

According to Sorainen, “in this round, together with investments from other investors, including venture capital fund Practica Capital, the startup plans to raise EUR 4.8 million in total.”

In 2019, Sorainen advised Oxipit on a EUR 1.5 million investment from Practica Capital (as reported by CEE Legal Matters on July 25, 2019).

Sorainen’s team included Partner Mantas Petkevicius, Senior Associate Matas Maciulaitis, Associates Izabele Petrikaite and Goda Jakubauskaite, and Assistant Lawyers Nedas Tamasauskas, Barbora Bernatonyte, and Greta Lebedeva.

The Walless team included Partner Andrius Ivanauskas and Senior Associate Domas Sileika.

As the year draws to a close, we traditionally check the results. Therefore, let’s review the transaction market of 2022. If I had to choose, I would consider the birth of the second unicorn to be the most significant event in Lithuania. Globally, it must be the USD 44 billion deal between Elon Musk and Twitter, which has probably boosted popcorn sales worldwide.

The situation before and after the acquisition is still being watched by many internet users as a series.

As far as our country and region are concerned, it is difficult to see last year as a coherent period. I would divide the transaction market into two phases: from the beginning of the year to autumn and from autumn till the end of the year. In the first two or even three quarters, the market was very active. In the first half of the year, 54 deals were announced in the Baltic M&A market. The total value of the deals was just over EUR 1 billion.

The first 9 months of 2022 brought 81 deals with a total value of around EUR 1.5 billion. This compares to 121 deals announced in the same period the year before. The result of 9 months in 2020 was 44 deals.

The market is now calming down. The presumptions of bad times have finally caught up with us.

It should be stressed that 2021 was a record year in terms of the number of transactions in Lithuania in general. Therefore, it is quite difficult to compare years and to assess market activity from the overall figures. However, we still had a lot of work, so if we measure the number of transactions over the last 3-5 years, last year was above average.

The second unicorn

There were no particularly large buy-sell transactions in Lithuania in 2022, which would dwarf the others. Nonetheless, one large investment transaction was recorded. Nord Security, a Tesonet Group company, raised an investment of USD 100 million and was valued at USD 1.6 billion at the time of the transaction.

The investment is not a typical M&A transaction, but it is not a loan either. The money was added to the company’s capital and some of the shares changed hands. Therefore, the statistics include such a transaction.

Whatever we call it, the transaction was one of the most significant ones last year, giving Lithuania its second unicorn. This, in turn, continues to stimulate capital movements and investment. It is quite possible that, just like after Vinted becoming a unicorn, the number of millionaires will rise in Lithuania.

Investments in space technology

Among the most significant transactions of the year, I would also name the acquisition of NanoAvionics. Norway’s Kongsberg is a strategic investor that wants to further develop space technology rather than maximize profits. They have brought not only money but also a lot of know-how. That, I would say, is the recognition of the giants of this industry. Companies like Kongsberg do not invest in unknown enterprises in unfamiliar jurisdictions.

Moreover, the activities of NanoAcionics are closely related not only to space and earth exploration but also to the defense and energy sectors. The potential is enormous and the company is worth keeping an eye on.

Another deal I like using as an example is the acquisition by the Norwegian BEWI. It is one of the world’s largest manufacturers of packaging and insulation solutions, which acquired 100% of Baltijos Polistirenas UAB. When the war broke out, BEWI was already in the process of buying the company whose production is related to petroleum products, which we do not have in Lithuania. There were also other problems related to raw material acquisition and logistics to be solved. Moreover, the company also operates in the construction sector, which was already in turmoil at the time and which is also expected to remain stagnant for at least a while. Despite all these negative factors, the buyer did not hesitate.

The deal demonstrated the confidence of Scandinavian investors in Lithuania. It was one of the first deals since the start of the war. It may therefore have reassured other investors.

A hard winter

In late autumn, a slowdown began. The market was already talking about it in the summer. However, the premonition did not materialise, and the action continued until the fourth quarter. The slowdown was due to objective factors – war, inflation, rising interest rates, falling share value, uncertainty about the future, and other related issues. Overall, it is strange that the slowdown has come to Lithuania so late. Even though the war has been going on since February, we are practically the last ones in Europe to be caught up in the negative sentiment and pessimistic forecasts.

Investors are very cautious about the future because businesses are bought for future profits. Naturally, if the future is not looking good and the outlook is bleak, the market starts to stagnate. The buyers are the first to get caught up in this mood and start beating the price, but the sellers need a little more time to change their expectations, so usually in such a market situation, the negotiations get stuck for a while. Of course, they often resume later, but with adjusted expectations. I would expect the process to start again in the middle of next year.

The American wave

Both positive and negative developments in the global market are driven by the US. Last year’s processes were no exception. As a reminder, first the stock market fell, then base interest rates started to rise, and money became more expensive. These changes have also affected the growth of start-ups, making it more difficult to raise money. Then there was increasing speculation that some businesses across the Atlantic were overvalued, and the downward spiral began.

Many companies saw their valuations fall, and around the end of the summer, the big tech companies started laying people off.

Nevertheless, significant deals were made. Globally, in addition to the aforementioned Twitter, I think there were at least two other large acquisitions that deserve attention.

The first one shows the growing importance of the games industry and symbolises a new phase in which the big global corporations are playing the first fiddle. I am referring to the deal in January 2022, in which Microsoft acquired Activision Blizzard, one of the world’s biggest video game developers, for USD 68.7 billion. If the deal is completed (planned for 2023), the software giant will become the world’s third-largest gaming company in terms of revenue (after China’s Tencent and Japan’s Sony), although this is only its secondary activity. It seems that this industry is not child’s play.

Another deal worth mentioning, not only for its impressive amount, took place in May 2022. Broadcom, a diversified and increasingly cloud-focused semiconductor manufacturer, agreed to acquire Vmware, a cloud computing and virtualisation technology company, for USD 61 billion. As a consequence, Broadcom’s share price fell by almost 20% after the transaction (not for the first time, by the way) due to very different cultures of the companies. In addition, Broadcom has a reputation for mass redundancies and divestments of unwanted divisions after acquisitions (as happened with Symantec and CA Technologies). Nevertheless, a company with its chip and server virtualisation and IT infrastructure businesses in one pair of hands could become very powerful. Thus, the whole IT market is waiting to see what will happen to the veteran of the Silicon Valley Cloud.

Life on the edge of the front

In any case, the deterioration of the market curve in Lithuania has not been as dramatic as in the US, as our companies have always had more modest valuations and the stock market has not suffered substantially, as it is virtually non-existent compared to the US. It is precisely because of these key factors that our sentiment in the market is calmer and the negative impact is less apparent.

Imagine the panic that would ensue if the shares of our country’s major companies were listed on the stock exchange and we witnessed a negative trend where the value of the shares fell by 20% or more every day. Every day. I can assure you that market sentiment, and therefore investors’ expectations, would be much worse.

However, it must be acknowledged that market sentiment is not good and is getting worse. We should be happy that Lithuanian companies managed to attract investments in the first half of the year, thus jumping on the last train. Otherwise, it would be extremely difficult and, frankly, maybe impossible to do so now.

Although some global trends reach us more or less late, in the eyes of the world we are in a whirlpool of events and, unfortunately, they are not positive. The war in Ukraine is one of them. To some, it may seem that we are living almost on the front line. However, Scandinavians, Poles, Germans, and investors from other countries in the region are saving our market. They have a much calmer approach to the situation saying that the closer you are, the better you understand the real situation.

I think the uncertainty that is now prevailing in other markets around the world will soon make its way to Lithuania. The market will no longer be so inert and there will be less spontaneity. On the other hand, we should bear in mind that there is still a lot of money that is planned to be spent.

To conclude this brief overview, I would like to share my optimistic outlook for the next year. I believe that the situation in Ukraine will turn for the better, there will be more positivity in the markets, and the overall market climate will be favourable. So, bearing in mind that we will have to “make up” for what was lost in 2022, and will still be wasted next year, we will finally be able to say at the end of 2023 that it was a normal year in the transaction market.

By Elijus Burgis, Partner, COBALT

Sorainen has advised Rgreen Invest on providing EUR 42 million in funding to the Green Genius renewable energy company to build eight solar projects with a total capacity of 65.7 megawatts in Lithuania.

Rgreen Invest is a French investment management company specializing in the financing of green infrastructure.

According to Sorainen, “the solar power plants are scheduled to be built in Lithuania by 2024. They are projected to generate an estimated 82,400 megawatt-hours of green energy per year and to save over 34,600 tons of carbon dioxide. These parks will provide green electricity to the B2B sector and will be connected to the electricity distribution network.”

“Faced with the imperative to end European dependence on energy imports, it is crucial to remain operational by finding substitutes for our carbon-intensive electricity mix,” commented Rgreen Invest CEO Nicolas Rochon. “Boasting increasingly shorter development durations and cost efficiency, renewables enable us to decarbonize our interconnected European grid and increase our entire continent’s energy independence.”

“The green transition requires capital providers with financial and specific technical competence in the renewable energy field,” added Green Genius CFO Rokas Bancevicius. “These competencies are what makes our partners so appreciated in international markets.”

Sorainen’s team included Partners Augustas Klezys and Asta Augutyte-Rapkeviciene, Counsel Lina Ragainyte-Mezene, Senior Associates Justina Paskeviciene and Svetlana Rudaja, Associates Ieva Dagyte, Goda Drasute, Simonas Slitas, Laurynas Kontenis, Goda Jakubauskaite, and Sandra Aleksandraviciene, and Assistant Lawyer Andrius Pilitauskas.

Cobalt has advised Norwegian investment company EECP on its sale of a grocery-anchored retail store portfolio in Lithuania.

According to Cobalt, “the portfolio contains 17 stores, the main tenants of which are Maxima and Ermitazas, and the total area is 50,000 square meters. The stores operate in Vilnius, Kaunas, Klaipeda, Alytus, Siauliai, Ukmerge, and Plunge.”

The Cobalt team included Partner Simona Oliskeviciute-Ciceniene, Of Counsel Andrius Kazlauskas, Managing Associate Rasa Mikutiene, and Associate Augustinas Petkevicius.

Editor’s Note: After this article was published, TGS Baltic announced that it had advised GLG Projektai on the acquisition through a share deal. GLG Projektai is owned by the NDX and Galio groups. The TGS Baltic team was led by Executive Partner Marius Matonis and Partner Aurimas Pauliukevicius and included Senior Associates Paulius Dabulskis, Indre Vickaite-Liatuke, Simas Paukstys, Jonas Salna, and Lukas Vaisvila, and Associate Dovile Sokolova.

Saule Dagilyte has been appointed as the new Country Managing Partner of Sorainen’s Lithuanian office on January 1, 2023. She takes over from Tomas Kontautas, who held the position since 2017.

Dagilyte, who is also currently heading Sorainen’s Tax team, has been with the firm for over 12 years. She first joined Sorainen as Head of its Tax & Customs practice in 2010 and was promoted to Partner in 2016. Earlier, between 2007 and 2010, Dagilyte was a Tax Consultant with Deloitte. Earlier still, she was Secretary General of the Brussels office of European Youth Press, from 2006 to 2007, and Senior Youth Policy Expert at the Ministry of Social Security and Labor of Lithuania, from 2003 to 2006.

“Sorainen’s partnership agreement provides for a two-year term as Office Managing Partner,” Kontautas commented. “I thank the Partners for their trust and the opportunity to lead the Lithuanian office for three terms, and I am glad that Saule, who has developed the largest tax law practice in Lithuania, is taking over this position. I have no doubt that her experience will be truly valuable in further growing the Sorainen Lithuanian office.”

“Respect and collaboration are the values that not only guide me personally but also unite the entire Sorainen team,” Dagilyte added. “I am stepping into my new role with confidence that together we will work successfully towards fulfilling our core purpose: to grow prosperity in the region by helping clients succeed in business.”

Sorainen has advised Orion Leasing on signing a EUR 52.8 million guarantee agreement with the European Investment Fund under the InvestEU program for financing Lithuanian companies.

According to Sorainen, the InvestEU program, launched by the European Commission with the European Investment Bank Group as the main implementing partner, seeks to boost crucial investments across Europe in support of the EU policy priorities, such as the European Green Deal and the digital transition.

“With the InvestEU guarantee, Orion Leasing will be able to offer financing with lower initial down payments than the standard and more attractive pricing conditions,” Sorainen informed. “Funding will also be provided to microenterprises with difficulty accessing credit in the form of microloans from Orion 1, which works under the Orion Leasing brand.”

“With a guarantee of EUR 52.8 million, we will be able to confidently finance micro, small and medium-sized enterprises that are perceived as high-risk, and lack sufficient financing options even when they may have strong potential,” Orion Leasing CEO Laimonas Belickas commented. “For most of the products, the guarantee will be valid for financing not only in Lithuania but throughout the EU.”

Orion Leasing is a Vilnius-headquartered company providing leasing services for businesses.

The Sorainen team included Partner Augustas Klezys and Associate Ieva Dagyte.

 

On December 29, 2022, Sorainen announced that INVL Baltic Sea Growth Fund’s acquisition of Nemunas and Egles Sanatorija (reported by CEE Legal Matters on June 13, 2022) had closed.

Both transactions were closed following the receipt of regulatory approval from the Lithuanian Competition Council.

As previously reported, Sorainen had advised the INVL Baltic Sea Growth Fund on its acquisition of the Lithuanian treatment centers.

The INVL Baltic Sea Growth Fund is a private equity fund in the Baltics.

Nemunas is a treatment center in Birstonas, Lithuania. Egles Sanatorija is a SPA and treatment center in Lithuania that provides rehabilitation, rest, and medical services in Druskininkai and Birstonas.

“We are continuing to invest in this high-performing sector and look forward to further strengthening the leading position in the Baltic States, created by the shareholders, managers, and employees of the company,” INVL Baltic Sea Growth Fund Partner Nerijus Drobavicius commented. “The healthcare sector in Lithuania and the entire Baltic region, as well as in other European Union countries, has a high potential for growth as society continues to pay more attention and puts more focus on health restoration and strengthening individual well-being. Due to its impressive quality offering an extensive range of healthcare services, the Egles Sanatorija brand has become probably the best known in Lithuania.”

Sorainen’s updated team was led by Partner Mantas Petkevicius and Senior Associate Laura Matuizaite-Mikste and included Partners Daivis Svirinas and Asta Augutyte-Rapkeviciene, Counsel Lina Ragainyte-Mezene, Senior Associate Edita Dauksiene, Associates Goda Drasute, Gabriele Raizyte, and Auridas Litvinas, and Assistant Lawyer Danas Sniute.

Sorainen has advised Tewox on the acquisition of the Dragunai shopping center in Klaipeda from Zabolis Partners. Motieka & Audzevicius advised the sellers.

Tewox is a special closed-type real estate investment company managed by Lords LB Asset Management.

According to Sorainen, since 2017, the Dragunai “shopping center has been managed by the investment company Pirmoji Investavimo Imone, managed by Zabolis Partners. For an undisclosed sum, Tewox purchased 3,239 square meters of retail space.”

Sorainen’s team included Partner Kestutis Adamonis and Senior Associate Julija Kirkiliene.

The Motieka & Audzevicius team included Partner Rokas Jankus and Senior Associate Aivaras Grigas.

In Lithuania, M&A transactions are up, litigation procedures are down, and the Competition Council has been handing out hefty fines for cartel infringements, according to Triniti Jurex Managing Partner Vilija Viesunaite.

“From the start of summer, we were already preparing for a bad winter,” Viesunaite begins. “Thankfully, we’re not there and are still busy, albeit some business sectors have shown signs of slowing down.” According to her, the M&A market – which is quite active – has been reshaping a bit, with “a clear trend of there being an uptick in the sales of local companies to foreign ones. In particular, Viesunaite says that the Lithuanian start-up sector has been performing admirably and that “investors are going after these companies – there is a lot of investment in the start-up business.”

Additionally, Viesunaite reports an increased demand for legal work surrounding ESG. “Everybody is looking for legal advice in this area,” she says. “But, in order to be properly equipped to advise clients on ESG matters, one also has to possess a strong command and knowledge on environmental, financial, and other matters,” she adds, explaining the complexities of the area.

Moving on with legal market updates, Viesunaite reports that there is a downturn in the number of disputes in Lithuania. “Following a recent litigation survey of ours, we have discovered that the dispute numbers are down four times when compared to ten years ago. It would appear that businesses are not deciding to go to the courts as much as before, rather opting to try and settle their differences or engage in arbitration proceedings,” she explains. “The statistics indicate that there are, as of right now, 0.27 disputes per company when looking at the entire market.” 

Regardless, even with litigation not being the weapon of choice for most, Viesunaite says that there is “still quite a high number of disputes related to corporate restructuring and wind down – an echo of the COVID-19 period probably. We can look at these as indications of what’s to come in the future,” she says.

Also, Viesunaite reports that there has been a boom in IP registrations in the country, recently, on account of the “EU compensation system, which our country was using quite a lot. A high number of trademarks have been registered, and we hope that next year will be similar, despite the compensation system being closed already, because new funding will open up next year,” she says.

Finally, Viesunaite reports that the Competition Council of Lithuania has discovered that a “large number of medical distribution and sales companies have been engaging in collusion, and they were fined EUR 72 million for these infringements. According to the Competition Council, this is their biggest fine yet,” Viesunaite concludes.