Livonia Boosts Baltic Private Equity Niche With $117 Million Bet

Livonia Partners, a new investment
partly owned by Estonia’s LHV Pank AS group, wants to
boost investor access to private companies in the three Baltic
economies, among the fastest-growing in the European Union.

The company, which is still being registered, already has
“significant commitments” for its 85 million-euro ($117
million) Livonia fund, Mindaugas Utkevicius, a founding partner,
said on Oct. 26 by phone in Vilnius, Lithuania. That includes
the European Investment Fund’s pledge last week to contribute as
much as 20 million euros, he said.

The Baltic Innovation Fund, through which the Luxembourg-based EIF will invest in Livonia, seeks to develop the Baltic’s
limited equity markets. While the Latvian, Estonian and
Lithuanian economies grew 5 percent, 3.9 percent and 3.7 percent
last year, the region’s 79 publicly traded companies often see
less than 1 million euros of combined share turnover a day.

“We see a private equity niche here,” said Utkevicius,
who’s also a partner at Tallinn, Estonia-based LHV Capital. Most
of the money will come from pension funds and similar investors
in the Baltic and Nordic countries, with some from other parts
of central and eastern Europe as well, he said.

Large Entrant

Livonia’s target size is “truly very big” in the context
of existing Baltic private equity investments, Swedbank wealth
manager Andrius Suminas said by phone in Vilnius.

“This is great news, showing more and more investors are
trusting the Baltics’ impressive economic story,” Suminas said.
“It also means more competition to find and further develop the
region’s most promising, reliable companies.”

In the hunt for investors and attractive companies, Livonia
will compete with BaltCap Management Ltd., which is fundraising
for its 100 million-euro Baltic Investment Fund II LP, also with
20 million euros from the EIF. Other competitors include smaller
Baltic funds run by LitCapital Asset Management and Practica
Capital, as well as private equity funds from Scandinavia and
Poland that include Baltic companies.

“Not to worry, we have a strong pipeline” of potential
investments, Utkevicius said. He said the Livonia fund plans to
buy stakes in eight to 12 Baltic firms within five years,
ideally starting in the first half of 2014.

LHV Background

Livonia’s other founding partners include LHV Group and its
chairman, Rain Lohmus; Kaido Veske of LHV Capital; and Kristine
Berzina, who is managing partner at Mindport SIA, an investment
company based in Riga, Latvia.

Adam Saulius Vaina, a partner at the Tartu, Estonia-based
management consulting firm Civitta, will join Livonia as a
partner when the fund reaches its target size, according to

Utkevicius helps manage 15 million euros that LHV Capital
has invested in private Baltic companies since 2005. That
portfolio is being liquidated as the larger Livonia team of
partners gets to work, he said.

“There will be some continuity” with LHV Capital’s
strategy of investing in medium-sized firms with the potential
to expand operations to all three Baltic countries, he said.

LHV Capital this month sold Baltic Ticket Holding AS, which
runs event ticketing companies in the Baltic countries and
Belarus, to the unit of the St. Petersburg, Russia-based entertainment group PMI Corporation.

Return Record

Utkevicius said LHV Capital met all return targets for its
2007 purchase of 65 percent of BTH. He declined to elaborate. In
2011, LHV Capital sold its majority stake in Veju Spektras UAB,
a 30 megawatt Lithuanian wind park, to Inter RAO Lietuva AB,
achieving a 20 percent internal rate of return on the 2005
investment, according to LHV Capital’s website.

Remaining to be sold are 100 percent of AB Archyvu Centras,
which manages digital and physical archives for companies in the
three Baltic countries, and a minority stake in Qvalitas
Arstikeskus AS, an occupational health-care provider in Estonia,
according to Utkevicius.

Livonia probably will extend LHV Capital’s investment focus
on traditional business services companies to include
manufacturers with strong export potential, he said. It will
avoid areas such as real estate, lasers and biotechnologies,
where the partners lack competencies.

“In any case we’ll be pan-Baltic, with partners based in
each country, and will build on LHV Capital’s track record and
relations with companies and investors,” Utkevicius said.

To contact the reporter on this story:
Bryan Bradley in Vilnius at
[email protected]

To contact the editor responsible for this story:
Balazs Penz at
[email protected]