News

By Avo Kaasik - Principal - Baltics and Nordics and Country Manager for Estonia

January 2026

The market capitalization of companies listed on the Nasdaq Stockholm exchange amounts to approximately EUR 1.1 trillion, with 363 companies on the main list and 358 on the alternative list (First North). In addition to Nasdaq Stockholm, the smaller Spotlight exchange is also thriving, with around 140 listed companies. Dividing Stockholm’s market capitalization by Sweden’s population (10.6 million) gives roughly EUR 104,000 per person.

On the Baltic regulated market, the main list includes 31 companies with a market capitalization of EUR 9.5 billion, while the additional list of 18 companies totals EUR 1.3 billion. Furthermore, 44 companies have listed bonds with a combined volume of EUR 10.8 billion. The First North market includes 20 companies with a market value of EUR 293 million, and its bond market (52 issuers) totals EUR 665 million. The foreign bond list mainly consists of Lithuanian government bonds, with a market capitalization of EUR 21.3 billion. Excluding this last category, the total capitalization of Nasdaq Baltic (shares and bonds) is about EUR 22.5 billion. The combined population of Estonia, Latvia, and Lithuania is 6.1 million, which equals roughly EUR 3,700 per person.

The difference is about 28-fold. One explanation for this gap could be the age of entrepreneurship and capital markets. Swedish business has a very long history—the Stockholm exchange was founded in 1863. In the last quarter of the 19th century, well-known companies such as Atlas Copco, SKF, Sandvik, Alfa Laval, Ericsson, and Electrolux emerged. Estonian business is only about 35 years old, and wealth accumulation is equally young. Over time, companies in Estonia will also grow larger. Already, the next generation of entrepreneurs is taking over leadership and ownership from founders, or companies are being sold to new owners. Below, I highlight a factor related to entrepreneurship that may help explain the nearly 30-fold difference in market values between Swedish and Baltic companies.

Many companies listed on the Stockholm exchange have grown both organically and through mergers and acquisitions (M&A). In addition to medium-sized companies and large industrial groups, the Stockholm exchange also lists several investment companies whose main goal is to acquire profitable small and medium-sized niche businesses (SMEs). Examples of such investment companies (compounders or serial acquirers) include Lifco, Addtech, Volati, Lagercrantz, Bergman & Beving, Indutrade, Storskogen, Röko, and others. These firms aim to increase profit and cash flow per share by acquiring profitable SMEs and holding them long-term, not reselling them. The price-to-earnings (P/E) ratios of these investment companies often range from 30 to 45, compared to Baltic companies’ typical P/E ratios of 5 to 15.

Investment companies seek SMEs with an operating margin of 15% or more, operating profit (EBIT) between 2–8 million EUR, usually family-owned and operating in the B2B sector. These businesses have developed their own products (or services), are successful in their niche, export most of their output, and have low customer concentration (e.g., no single client accounts for more than 15% of revenue).

Such companies own product rights, prioritize continuous product development as a key component of profit growth, and allocate a fixed share of annual investments to it. Swedish companies succeed internationally in selling their products; they are typically manufacturers of their own products rather than subcontractors. Occasionally, they outsource production processes, but product development, marketing, and sales remain in-house. These successful family businesses operate in fields such as machinery, automation, instruments and tools, filters, pumps, nozzles, electronics, cable and plastics industries, and more. The list is endless. They don’t have to be manufacturers—successful SMEs may also operate in distribution. Every sector offers niches where companies can become leaders.

Such niche producers (or service providers) share several characteristics beyond high profitability:

• Return on Capital Employed (ROCE) is a key metric. They own only essential assets; others are leased.
• Decentralized management and open leadership style—business unit heads and CEOs ensure decisions are made quickly without unnecessary layers.
• Simple measurable goals, such as annual operating profit growth. Many such companies do not use annual budgeting.
• Strong cash flow generation (EBITDA minus CAPEX), used for organic growth, minimal investments, acquisitions (M&A), or dividend payouts.

In terms of corporate governance, Swedish family businesses, like those in Estonia, are usually managed by family members rather than professional boards. Investment firms, however, use decentralized management—decisions for a specific company are made by its own management, which is rewarded for profit growth.

Engineering, IT, and entrepreneurial ambition enable innovation in product design and development, which is key to global success. Estonia generally does well in IT, but we need to value engineering education more. Entrepreneurs should also collaborate more actively with universities. We should encourage young engineers to create world-class products so companies remain competitive.
Finally, a question for entrepreneurs about your product or service pricing: What happens if you increase your price by 10%? The wrong answer is: “We raised prices by 2% seven years ago; competition is tough, and price increases aren’t possible.” The right answer is: “We raised prices by 10% last year and another 5% this year. Some customers left, but those who stayed appreciate our quality and added value, and our profit grew further.” These are the kinds of companies we need to build—attractive to employees, customers, suppliers, owners, investors, and even tax authorities, which benefit from growing tax revenues.

If Estonia develops more successful family businesses with operating margins of 15% or more, investor interest in Estonian companies will grow. New private equity funds and investment firms will emerge to acquire these strong family businesses.

I aim to instill greater ambition in entrepreneurs: a 4–10% operating margin (EBIT) is good but not enough. The goal should be at least 15%. Then our companies will grow larger, and investors will knock on owners’ doors more often. The emergence of profitable niche producers will also develop our capital market.