Trigon Capital is one of the leading investment banks in the Baltics and North West of Russia. Could you give us a historical background to Trigon Capital?
We founded it in 1994. At the time of founding we set up the joint venture to Hansapank, which in those days was good but still not leading bank. An offshore holding capital Trigon hold by myself. Since then we have growing up these two and we are also bought out Hansapank, we are now partnership. Since the beginning of this year, when we bought out the final branch of Hansapank in the beginning of this year, we changed the name Hansa Investments to Trigon Capital. We operate through others regions with offices in Tallinn, Riga, Vilnius and St. Petersburg. We are the leading player in the region in information technology related issues, including Russia where we belong recently based to the largest control state, the largest Internet originally Russian, this is one example. We offer full service of investment bank in the Baltic Republics.
What is the mission of the Trigon Capital and philosophy behind it?
The philosophy behind that is to act as an intermediate opportunity for the region. The region is not very well known internationally. The further you go the more likely people confuse the Baltics with the Balkans. As a result, the economic miracke that we witness here is not as widen as it should be. what It is maybe the most successful economy that emerged from the former Socialist block. Estonia is most likely the country to be an exceptional success story. This can be seen when you walk around here. Especially the young people speak English. You don't feel like being in the Eastern Europe when you talk to people, the same time they turn around and talk to Russians and other people in former Soviet Union. The political leadership is showing an exceptional courage in implementing the focuses.
Could you give us some information about Trigon Capital, about your financial products and services, what your market share is, the number of staff and your turnover?
Basically, we have about 40 specialists in the region. The market share is always very difficult to calculate but we can say we are marketed in traditional bank, advisory services on NMA. We devised mostly on very large transactions here. The largest one we did was when Swedbank, the leading Swedish bank bought the control stake of Hansapank. We acted on behalf of Swedbank. We acted on behalf of most of the transactions involved in Scandinavia when advisors have been retained in the Baltic region. We are mostly acting for Swedish and Finnish companies. We are also the market leaders in asset management and advisory services. We advise the largest closest fund in the region which is called Baltic Public Fund which initiating back in 1994. We are now partnering with the Société Générale. On that, we are also advising on the largest opening funds stock exchange region, called Hansa Investment Fund which is on Helsinki Exchange. We are partnering with Sampo insurance. In addition, We have a number of local funds, the local fund market is very small. On the security side the security business is our newest addition to the plenty of services we offer. Last 6 month we have been growing our research and broking our staff. We are not the leading but may be we are no 4 or 5 in brokerage. We are going very fast as we are learning just how to start up a business. To be able to challenge the dominant Hansapank sector, the broking sector because Hansapank 50% of turnover I don't think it's sustainable and really reasonable to invest in it. Capital market has been extremely quiet for last 2 years due to the Russian crisis. Before that we had market share, which was almost equivalent to the rest of the market put together. We are that big than everyone else put together. We are quite dominant in the sectors we focused on in terms of an investment bank. In terms of numbers, the market here is small, we're advising on assets amounting to about 70 mln dollars. So, this is pure equity. So, in term of money that we raise for the region, the calculation that we have made is over half a billion dollars over the entire period of our existence. We have focused on very large transactions because most of the transactions we do in this region are very small. Most co-operations are very small. The average size of the top 100 companies in this region have a turnover of only 25-30 mln dollars . So we are not looking at large companies, the typical size of financing is very small. But nevertheless adding it all together we believe that we raised over half a billion in capital in this region.
You said 40 people are working for you, they are obviously very qualified people doing that work for you. What is your point of view of human resources here in Estonia?
I think we have a good base of very competent and originally well-educated young people from this region, coming not only out of the local universities but increasingly coming out from the international universities. Quite a lot of local people working for us have studied abroad. In addition to that we have a handful of people with Western background, so we are very international. We also have a mixture of people here in Tallinn, for example, we also employ a number of Latvians, Lithuanians and Russians. There is no much point in ignoring the fact that once you've found somebody, they might be going back to their area. The markets are small, you need to apply across the entire region.
Have you any difficulties with finding a staff?
Yes, the staff is the result of evolution of the life of the company. Not everybody we have hired has worked out. The people who fit in have been very loyal and stayed on and now formed the core of the business. We also found that local people had showed great adaptability. This is a good reason to be very optimistic for the future. The business we were doing 3-4 years ago is very different from the business we are doing now. 3-4 years ago we were very much corporate finance as doing shares in capital market transactions. That's what the market was all about, basically calling in the financial investments for early investments abroad to capital market transactions. The last 2 years also shipped the cause.. towards a lot of advisory work on the corporate finance side, which is a very different sort of business. You look at large investment banks internationally and people doing largely work are very different from people doing capital market transactions. Given it, this is a small market and we are a small company, our people need to adapt and they did an excellent job and the fact is that most of the international clients we have worked with have comment t how surprised they have been with the level and the quality of services. It is very much due to how adaptable people are here and how quickly they really learn, may be because they ask for a job that they would not be expected to do until later in their careers elsewhere. They rise the challenge not only in the investment banking, quite a number of politicians and business leaders are very young. The Prime Minister was 30 when he first become the Prime Minister back in 1992.
You said you are the number one in Internet advisory in the region. Can you tell us more about some of the projects you have done and also what does Internet mean to you and to Trigon Capital?
We have been very active in information technology. Our philosophy is not so much to financially bank through Internet, Russia is a slightly different story. Market here in the Baltics is small for that. Whether it's business-to-consumer or business-to-business it is hard to see these businesses when the market is that small. The enormous potential is in services and in software education. On the services side we recently saw a picture of Allan Martinson, the head of Microlink. We recently arranged a share issue, for Microlink. We increased their share capital quite substantially, our funds now represent the largest single shareholding in Microlink. We do other corporate finance. We recently arranged sharing report Helmet which is a system integrator, maybe Mircolink biggest challenger system intergration here. We have worked for SWH (software house) which is the Latvian biggest software. We arranged investments for Alno which is one of the leading Lithuanian IT brands. We have advised here Datalane what has been a fascinating story. This is a small company set up in 1997 by 2 individuals, they are now 45 people. They developed process whereby large amounts of information could be transferred between mobile phone and PC. This product was needed by a huge US software computnig one, a sort of a product family in data transfer field. They ended up enquiring Datalane for the share swap. The only company which has the same product as Dataline was the UK company Harrogon Which is recently listed company by bern.com the US. Bern.com is competitive no 1, they paid 500 mln dollars in shares for Harrogon which size is not bigger than 40 people. We do not know the value of the shares for Dataline, but the Datalane founders could end up the richest men in Estonia when the share issue takes place. In these types of sectors, there's a lot of going on and we believe that this region has real potential in the IT sector, the fastest growing industry globally. People here are very competent in hard sciences and mathematics, which is the base for a lot of their work in software and encryption technology. How do make sure that transactions are safe in the booming Internet. All that requires a huge amount of software applications being developed and a lot could be done here where people have the technical and mathematical skills to do it. This is the sort of work we are banking, the process of setting up the first IT incubator in the Baltics region which we have to close in May - from zero to hero, or what they call zerotohero.ee. There's more fields . In Russia, the largest Internet retailer called Ozon, which among many other features is the proud owner of the amazon.ru. In addition to that we are now working as an advisor with the leading software group in North-West of Russia called Rexon ? . I have very big plans and we believe the software industry and the Internet business in Russia will explode. People realized how, it spite of the very low numbers in Internet penetration, when you look at the people with access to the Internet who actually earn money, the figures are actually incredibly impressive. Over 90% of Russian business has access to the Internet. Russia is not that far behind than one might believe. Nevertheless, in spite of that Internet is intensive, Russia is a big enough market and different enough market to turn the language to really help to make the great opportunity. We are going to be very active on the Internet side in addition to what we have already done.
How many millionaires you think it will make?
Local press is making millionaires. It is very hard to say, but quite a few.
What is your role in the privatisation in Estonia?
We have been involved in a couple of privatisations
but we tended to stay away from privatisation in
the whole region. There are number of reasons but
the most important is that we do not like to get
into very political views. Estonia for example is
very clean and the whole region makes great efforts
carrying out privatisations in a very transparent
way. It is very hard in this environment to avoid
politics in this type of transactions. It is not
something we feel we are really good at; we prefer
to stay to the private sector where we can operate
on purely commercial terms. We also believe it is
the non-privatised sector, which is where the dynamite
in this region will come from. So, we don't think
we are missing out a lot. Having said that, we do
have an interest in privatisation, we are working
on the number of the ongoing privatisations. We
have interest in the rail privatisation, water privatisation.
We very much like to participate in the very senior
role of the next phase of the Telecom privatisation.
We teamed up with Chase Flemmings. We will look
at privatisation but on a selective basis. |
Are you working with other international clients?
Yes. We disappointed in sense that sometimes it is difficult to overcome the people's deception of political risk in the real privatisation. The real companies turned into the great privatisation, the great business. A lot of the Westerns companies we talked to had great comments on the political risk. We even basically working with one finally on board level just to risk on the political point of view. These are the reasons why I'm glad to see you doing the survey because more people will know about it, they will realise hopefully that things are very different from the way they may be appearing. Estonia for example is well known in the EU and it will not be listed another former Soviet Republic
What is your point of view on economic situation of Estonia and what are your opportunities for investment?
The future of Estonian growth in economy is going to be a combination of two ways. One is really acting as a lower cost base for selling goods and services to Scandinavia and the rest of Western Europe. The other one is to act as a bridgehead for doing business with Russia. It will take more time, the reason is there have been so much Scandinavian investments into traditional industries here, it is a cost but it is a way of moving some production to a very satisfying location. We are here only 80 km from Helsinki. The largest biggest cities away from metropolitan region of Helsinki are 150-200 km away. Tallinn is the biggest city which is closer to Helsinki than any other Finnish city and not far away from Sweden either. Clearly, if you want to lower cost you could move production to whenever, India as well. But it is not easy to control the business. Have business or an operation here is very easy to control. The first wave of it has tended to focus more on capturing local markets, the market share of the Baltics but the next wave is to start to take the advantage of the operations here, it is actually supplying good backup for the home markets.
The other thing important which could be done here are services. We are not only talking about cost advantages related only to the low cost of labour but also about tax and generally regulatory advantages. For example if you are running a website, more and more business will shipped on to the web. What is really needed is to have the people here updating your website and handling from the back office point of view, the orders which might go to the website. This could be done here and as well in Helsinki. So, why not move more and more services to Estonia. Also software, now Helsinki is the fastest growing metropolitan region in Europe today and a lot of that is IT related, Stockholm Nokia , but it got Ericsson and its own IT. Both these are very dynamic cities. They are the kind of cities for new start-ups. If you are a Swedish or Finnish entrepreneur and you have a great idea, why set up this business in Stockolm or Helsinski, why not set it up here where you got much lower cost and when you succeed, your taxation of profits would be much more lower that it would be in Finland or Sweden. It is something that people have not quite caught on to yet but they will catch on and every month Tallinn becomes more and more liberal city from the Western point of view where now schools become bilingual, they now teach in English, so things are becoming easier in Estonia and I think we are going to see more and more entrepreneurs moving over here taking advantage of that they are close to their friends and colleagues and to what is happening in the market, but they will be operating in much cheaper environment and in a sucessful law tax policy.
As far as the Russia.. is concerned, the transit trade into Russia is a big business and Tallinn is the fastest growing port in the Eastern Baltic Sea. The reason to that is that the Tallinn Port is very efficient and very cost effective. Finnish ports cannot compete with Tallinn in the cost point of view.
More and more goods seems to be going to Tallinn because it is proving itself to be efficient and cost-effective. And the russians ports have been talking for a long time about setting up competing ports, but setting up a port is a very expensive business and eastwards comes shallower and drenching is maybe the most costly part of port construction. Set up a port in Russia would be extremely costly and of course, you have to wait for the ports in russia to be undecriminalized.. The western partners who for example operate here have often looked at Russia as well, I mean in the port sector. They refuse in getting engaged too much because of the problems with criminal elements and the lack of ability to really organise the operation properly.So, transit trade and related activities, Logistics types of activities will continue to be a big business. It might become a very good business for Estonia if Russian economy really starts to taking up speed. Because at the moment Russian transit business is mostly shipping out few products from Russia. But the economy starts to grow.
Estonia can deal with the both side, it can handle the western clients from one hand and know how to deal with Russian clients on another hand, that will be an ideal position. So, if you look at these two opportunities for growth, economic growth and expansion, it could ended up to something quite significant because the economy is so small, it's such a small base here that you do not need extraordinary success from the global basis. There is no reason why Estonia cannot grow faster than the Irish economy because it's such a low base and geographically it's far better place here.
Banking sector could be described as a metaphorical gateway. What are you doing as a company to make sure that you are attracting the correct levels of investment and attract people to come here and invest in Estonia?
The last 2 years have been very slow because financial investors broke private equity and capital have really shied away from the region as a result of Russian crisis. And this didn't really attract strategic investors. This is changing now and there is a very clear shift in sentiments going on. Most importantly, we do not really rely on a passive approach, we have people whose job is to work with the foreign investors to establish new contracts.
We have Swedish individuals for example working full time on Scandinavian investor relations. We probably will continue to grow our investor relations side, we are not in a happy position of being able to sell products that sell themselves. We try to arrange financing for companies here, for a project here, whatever it may be. We have to start explaining people why this project looks good on, and should not be dismissed because it is geographically located here in Estonia.
We believe that from the commercial point of view we are doing a lot of the same work what the government is trying to do with embassies and the Investment Agencies. We cannot do our commercial work without at the same time selling the country in the region.
Where do you see Trigon Capital in the future?
We basically believe that we would continue to grow, especially in Tallinn. We see tallinn as a regional base. We hope to take the skill-set we developed and leverage as much as w e can in the whole region including increasing Russia. We have some recent big success and we want to see more of that. If the Putin presidency will bring more stability to Russia we will see an enormous opportunity in Russia. We believe that the human skill-set which has been developed here in the Baltic market could be applied to Russia as well. At the end of the day, all these countries came from the same beginning and a lot of people here had to speak Russian. We can use the Russian-speaking individuals here who have the skill-set to do business in Russia. We want to grow as a regional cy by leveraging the human skills whict have developed over the last 6-7 years.
Could you give us some background information on your professional career?
I'm a Finnish in nationality, have lived in different parts of the world - China, Germany, Saudi-Arabia, the US, my father was a diplomat. I went to Cambridge University and ended up working for Goldman Sachs and Merryll Lynch. I used my savings to set up in Eastern Europe. I took big risk in terms of my capital building up Trigon. I was enticed by the challenge and opportunity of doing something in Eastern Europe. When the wall came down I thought this is my opportunity from the financial opportunity point of viee to combine the desire to be an independent entrepreneurial and at the same time do something that gave me the satisfaction of really contributing.. I am not just working in a huge financial centre, the skill-set is particularly useful to the region.
In which country did you start?
My first base was Prague. I did some business in Prague and quickly moved on here.
What has been your greatest success since starting your own business?
My greatest success was surviving the Russian crisis.
What would be your final message to Forbes Global readers?
The message is very clear. Estonia is very small country, it is extremely exciting country. It will become a country that in 5-10 years in the future people talk about as an exceptional success story. People today look back at Singapore and Hong-Kong in 60s and regret that they did not get themselves involved financially. The message to anybody reading about Estonia today is that Estonia might very well be Singapore or Hong Kong of future. Get yourself involved now and in 20 years time feel glad you did it. |
