Target Information

INVL Private Equity Fund II has signed an agreement to acquire a 75% stake in Eesti Keskkonnateenused (EKT), the largest waste management group in Estonia. This acquisition is expected to be finalized by the end of 2025, pending approval from the Estonian Competition Council and the fulfillment of additional contractual conditions. The existing shareholders of EKT, primarily management, will retain a 25% stake in the company.

EKT provides a comprehensive range of waste and municipal services that include the collection and management of municipal waste, secondary raw materials, construction waste, hazardous waste, and bio-waste, as well as street cleaning services. In 2024, the group is projected to generate consolidated revenues of approximately €77 million and employs around 800 staff members.

Industry Overview in Estonia

The waste management industry in Estonia is on a growth trajectory, driven by increasing environmental regulations and public awareness surrounding sustainability. Estonia has been adopting EU directives aimed at improving recycling rates and reducing landfill usage, which has led to a steady demand for innovative waste management solutions. The government emphasizes the importance of circular economy practices, fostering investments in waste-to-energy technologies and recycling facilities.

As a small but rapidly growing market, Estonia presents unique opportunities for waste management companies focusing on advanced technologies to handle waste effectively. The local market is evolving, with businesses adopting more sustainable practices, increasing the need for expert waste management services that align with national waste management goals.

In addition, the Estonian government has been actively promoting the reduction of single-use plastics and encouraging waste sorting among citizens. This dynamic regulatory environment creates a favorable setting for EKT to enhance its operational capacities, particularly concerning waste sorting and recycling initiatives.

Rationale Behind the Deal

The acquisition of EKT by INVL Private Equity Fund II aligns with the fund's strategy to invest in leading companies within the Baltic region that have significant growth potential. With EKT at the forefront of the waste management sector in Estonia, this investment is expected to facilitate further development of the company’s expansion strategy. EKT is currently working on a substantial hazardous waste incineration project that aims to increase its capacity from 2,000 tons to 15,000 tons per year, opening new growth avenues.

Moreover, the partnership is anticipated to enhance EKT’s sorting and recycling capabilities, contributing meaningfully to Estonia’s circular economy objectives. This acquisition allows the fund to leverage its extensive expertise in the waste management market to achieve operational efficiencies and elevate EKT's market position.

Information About the Investor

INVL Private Equity Fund II is the largest private equity fund in the Baltic states, focusing on developing a diversified portfolio through strategic investments in high-potential companies. The fund aims to invest between €10 million and €60 million in firms across various sectors that demonstrate strong growth prospects and competitive capabilities in a global context. INVL Private Equity Fund II is managed by INVL Asset Management, a leading alternative asset manager in the region with over 30 years of experience.

The fund is in a strong position to explore attractive investment opportunities in the Baltic states, Poland, Romania, and broader EU regions. It continues to focus on acquiring controlling or significant minority stakes in firms to foster long-term value creation and promote regional economic development.

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This acquisition represents a compelling investment opportunity for INVL Private Equity Fund II, particularly in the context of Estonia's ambitious environmental goals. The alignment of EKT's operational strategies with governmental policies on waste management and sustainability suggests a viable pathway for future growth and profitability. The anticipated expansion of its hazardous waste incineration project is particularly noteworthy, as it serves to increase both capacity and operational efficiency.

Furthermore, the growing market demand for advanced waste management solutions supports the investment's potential. By enhancing sorting and recycling capabilities, EKT is likely to position itself as a leader in the circular economy efforts within Estonia, benefiting from increased regulatory support and consumer demand for sustainable practices.

In conclusion, this deal reflects not only a strategic investment in a market with significant growth potential but also contributes to broader regional sustainability efforts, making it a sound investment choice for long-term value recognition within the Baltic economic landscape.

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