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Business purchase gains popularity
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23.01.2007
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When up to the present day the Estonian companies have been using the KredEx loan guarantee first of all for conducting their investments, e.g. procuring new devices or buildings, then at present the guarantee has been used increasingly more to buy the businesses or trade marks.
According to Jako Kruuse, the Head of KredEx Export and Enterprise Division, several Estonian companies have reached to the second phase of their development cycle where new possibilities for future quick growth are being looked for. “One has gained an understanding that in order to grow the market share the replacement of equipment and construction of new buildings is often sufficient enough. Increasingly more opportunities to buy up the competitors and companies working at the same field or merge with them whether in Estonia or abroad are sought to provide the sustainability of the company," noted Kruuse.
Express Pesulad LCC that works under the trade mark of Jazz Kiirpesulad can be brought as one of the recent examples. If in spring of 2006 the company used KredEx loan guarantee with an aim to build a new car wash to Suur-Sõjamäe, at the end of a year a decision was passed to extend its activity already by purchasing the whole Petra Wash Street and Spectra Car Wash Chain, creating a separate company for this purpose - Jazz Pesulad LCC. According to the statement of Ando Mellikov, the major owner of Express Pesulad LCC and Jazz Pesulad LCC the company wanted to increase its market share considerably and the purchase of two competitive car wash chains provided the best possibility for it. “The expansion plans were first made difficult by the lack of guarantees required for obtaining the investment loan from bank, but the surety of KredEx provided a solution to this issue,” mentioned Mellikov.
Also Viking Motors Co. that purchased recently a 100% share in a Latvian company SIA E&S Auto with a goal to expand its activity also at the quickly growing Latvian car market can be highlighted from among the KredEx clients.
According to Kristiina Kruus, the Business Loan Development Manager of SEB Eesti Ühispank, there is a clear growing demand for financing solutions to buy up companies and make merger transactions. “The structure of such financing is more complicated compared to the average, as a rule, as a merger changes the speed of the company growth and its organization considerably. In cooperation with KredEx we have been able to manage the risks of projects and realize a financing solution, suitable for such multifaceted needs of the client."
The Government created KredEx to help develop the businesses and enhance their competitive ability at international market. KredEx provides loan guarantee and export guarantees to Estonian companies. In 2006 companies took a total of 687 million kroons of loan from banks by the aid of KredEx to expand their activities.
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