FUNDS: Evli has left the building and is now entering Russia

By bne IntelliNews March 14, 2008

Nicholas Watson in Riga -

Evli Bank's acquisition in February of an almost 50% stake in the St Petersburg-based corporate finance house Avanko is actually part of the very same trend that the Finnish investment bank is trying to encourage in others: Nordic investors using the Baltics as a stepping stone to bigger things further east.

Evli's acquisition of the 49.9% stake in Avanko, which has offices in St Petersburg and Moscow serving a range of Russian and international clients, is part of an expansion from its Helsinki base that began with moves into Sweden in 2000, to the Baltic states in 2002 and into Poland in 2006.

"Our international expansion does have a theme in the sense that we're focusing on the Baltic Sea region," says Mikus Janvars, executive director of Evli's Latvian operations and director of Evli's Latvian corporate finance team. "That means future possible interest could also be in Denmark, Norway and also former Soviet states like Ukraine."

For now, Evli has its hands full integrating its operations with Avanko's team of 24 Russian bankers. The benefits of a tie-up with the Russian boutique investment bank are obvious: Scandinavian companies, buoyed by their success in the Baltic states, are keen to expand into Russia and the rest of the CIS, whose booming economies, by and large, appear to be some of the few bright spots in a very cloudy global picture. Russia is currently the 10th largest economy in the world; with the growth in commodity prices showing no signs of abating, its economy could well be the fifth largest by 2020.

"Obviously, we still see interest from Scandinavian companies in the Baltics, who see there as a first step toward moving further east and Russia. The Russian market is a place where everyone wants to be; the market potential is huge and that's something we hope to capitalise on," says Janvars.

Evli notes that financial investors have also become more active in the region as the average transaction size has increased and are now competing with industrials for assets. "Some dedicated CEE funds are getting more interested in our markets," says Janvars.

Why Avanko? Evli says that the Russian investment bank is already well known to the Scandinavian corporate world, having already represented some big firms like Nokia and Fortum in their expansion into Russia.

Evli also hopes to tap into the increasingly evident reverse trend where Russian firms, swelled by huge profits over the past few years, are moving out of their home markets in search of opportunities abroad. As well as the M&A aspect of this international expansion, the better-run Russian firms are also increasingly looking to raise funds on international markets to fund this growth. So far, the London Stock Exchange and its alternative AIM market have taken the lion's share of these IPOs and listings, but with the creation last year of First North - OMX Nordic Exchange's alternative marketplace for small growth companies - Evli hopes to attract some of Russia's smaller companies.

"Avanko is trying to offer public equity-related services like potential listings on the Nordic exchanges in Helsinki or Stockholm to Russian firms," says Janvars. "First North is targeting smaller companies like the resource-based Swedish companies, so this could turn out to be interesting for such Russian companies too."

Ultimately, Evli says it wants to offer its new Russian clients the same range of services it does its Scandinavian clients, including asset management and capital market services.

Full service

Evli currently has 29 funds that its high-net-worth clients can invest into, comprising 14 equity funds, five balanced funds and 10 fixed-income funds. Assets under management total some €6.4bn. That might seem a lot of funds and money for a boutique investment house, but it's testament to Evli's business philosophy and a reflection of the success that its Scandinavian clients have enjoyed over the past decade.

"We're basically trying to focus on the needs of clients and industry trends. For example, last year we launched a sustainable climate fund, which was well received, and we also offer real estate funds like Evli Property Investments and have done rather large real estate transactions in the Russian market, in excess of €100m," says Janvars. "We try to see what's interesting and then offer it."

Being entrepreneurial in its approach to offering services has, Janvars says, been key to Evli regaining the level of profits and revenues that the investment bank enjoyed before the dotcom bubble burst at the turn of the century. Being focused on the so-called TMT (telecommunications, media and technology) segment of the market meant Evli in 2000 had profits of over €40m on revenues of €90m. The collapse in the TMT sector put a bit of a hole in Evli's performance, which has taken until 2007 to recover to the same level; the group's revenues in 2007 were €79m, up by 42% from the previous year, while pre-tax profit came in at €28.2m. "2000 was the best year in our history until 2007. Only in 2007 did we again reach the same results before the bursting of the dotcom bubble," says Janvars.

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