Goal: to increase the wealth of its customers

The Most Competitive Financial Brokerage Enterprise 2008

GILD PROFESSIONAL SERVICES AS

The last year was very successful in the history of GILD. The net profit of the company was almost 81 million kroons, i.e. three times as much as the year before. “We opened offices in Sofia and London and increased the ratio of fund investments in the region of Central and Eastern Europe. We started with a new line of business – private banking, consulted almost twice as many merger and acquisition transactions compared to 2006, and increased the volume of assets in the GILD funds by almost 30%. We are extremely satisfied with these accomplishments, but considering the abilities of our team, our goals and the favourable market situation in investment banking, we would not have settled for anything less,” says Rain Tamm, the Managing Partner of the enterprise.

Tamm compares the work of an investment banker with that of a gardener who sees the fruits of the garden he has cared for only after a certain time. It is the same for some of the GILD projects and investments – their results can be seen only after several years. “Today we are getting ready to raise new funds and expanding our team, and we hope to reap the benefits of those actions not sooner than in five years. It is certain that we will not slow down, because the changing economic environment offers good new possibilities.”

Fortunately, the company was able to foresee the economic decline in the domestic markets a long time in advance, because for instance the rapid development in the real estate sector could not last for long. So it was decided not to restrict their geographic span of business only with the Baltic countries, but carry out transactions and manage investments in all the countries in Europe and close to Europe that have big development potential and where GILD had good local co-operation partners.

“The strategy we have chosen works and the good economic results of the first half of 2008 prove it. In investment banking and foremost in our business directions the volatility of the growth rate of the economy means a lot of attractive opportunities – for instance there might occur beneficial opportunities for companies who have enough capital for growth; and the need to include alternative investments has also grown significantly,“ Tamm says. Financial intermediation is always influenced by the economic climate and the low tide of the Estonian economy is unfortunately happening at the same time as the global financial crisis. In GILD, everyone is certain that small economies have the ability to adjust and change their course faster.

A wide grasp: Emerging Europe and the unique GILD
GILD has strategically defined its areas of business to be all those European countries where the potential for economic development is still very promising and diverse. In English there is a good short term for it – Emerging Europe. A good example for this is GILD Arbitrage, the first multi-strategy hedge fund regulated in Estonia and the Baltic countries. By now, almost 60% of the investments of the fund are outside of the Baltic states for the enterprise: in Armenia, Bulgaria, the Ukraine, and elsewhere. The main emphasis of the new investments is on growing markets of Central and Eastern Europe and markets of their nether regions, but they are searching for productive enterprises also in Estonia and other Baltic states, where they could invest money that comes from the increase in the amount of foreign investors.

Competition in managing alternative funds, investment banking and private banking is very different. “We might say that GILD as a whole is unique in the Baltic countries because of its structure that is based on partnership, its area of business and operating in a niche section of investment banking. All of these three lines of business have different direct and indirect competitors in the different countries we operate in. In general, we are focused on a very specific customer group, to whom we offer solutions that are flexible and innovative in the financial world. For instance, our flagship of alternative funds, GILD Arbitrage is to this day the only multi-strategic hedge-fund in the Baltic countries that is currently operating with direct investments in the entire Central and Eastern European region. As a second example I can give the fact that in the unit of investment banking, most of the co-operation projects are the result of direct negotiations with the customers, which means that we have very rarely had to compete over the customer’s mandate with other service providers,” Tamm says. Even the newest line of business – private banking does not have an alternative service provider, because we cover those people for whom the package of our services is the best choice.”

New challenges for experienced professionals
Even though by now, the key team of GILD has been a strong part of the financial sector for nearly ten years, the year 2007 was the first full year under the new brand name, which had to be introduced to the existing and new customer base. Another challenge was to enhance the partnership system and its principles, and actually taking it to another level. In a relatively short period of time, the company has managed to overcome these challenges. The whole team worked last year also to grow out of the Baltic States. An important sign about it is breaking through to the circle of international investors, which became possible after a change in the fund structures. The first investment banking transactions were finalized in the Ukraine and the company managed to implement and start other investment banking projects in new markets.
In October last year, the company published the GILD TOP 100, where for the first time 100 most valuable companies were listed. “It caused some extra work for the company and demanded energy, not to mention all the doubts about whether undertaking such a big project is worth it. The list we compiled and the positive feedback we received diminished all our doubts and I can say that we managed that great challenge very well,” Tamm is certain.

The key issues of Estonian economy
The director of the company has his certain opinion about the current economic policy. According to Tamm, the main question i show to be competitive and effective at the same time. He thinks that innovation should quickly be valued at a wider scope – in addition to changes in IT and gene engineering developments, for instance business innovation should be appreciated and encouraged more.

”In order to attract more foreign capital and foremost the big international enterprises, the first step is to provide a wider judicial and tax environment that favours business and the creation of a strong governmental surveillance system. The developing of first-class financial services benefits both the capital city and Estonia as a whole – it would mean a larger number of highly paid jobs, more opportunities for top specialists with international experience and background, an increase in the ratio of advanced business services with a lot of knowledge both in the local market and in export, etc.“

Tamm thinks that taxation in Estonia should become attractive for holding-structures. Although Estonia is known as a country with a liberal tax system, we cannot offer favourable conditions to large international groups and enterprises regarding the taxation of dividends, for instance. He thinks that the state can also greatly assist through signing agreements with as many other countries as possible that would avoid double taxation.

Visions and trumps
GILD is an ambitious enterprise and its director Rain Tamm is convinced that their goal is to be the leading investment bank in the carefully chosen niches of their main markets, but foremost in the Baltic countries. Tamm is assured that they would like to help the companies of their target markets to grow, expand and create a new value. “We wish to offer our reputable investors of an international calibre the most effective risk capital productivity in Central and Eastern European areas and to guarantee a profitable personal assets management for well-off entrepreneurs based on the whole assets principle. Our continual long-term goal is to increase the wealth of our customers.”
 

The manager operating in investment banking cannot stand by idly when his employees are working, he must know about everything that is going on. The financial sector is changing rapidly and the investment banking within it is changing even more rapidly. Rain Tamm has been active in the financial sector for a very long time and compares a successful entrepreneur with a top athlete who can be characterized by strong internal motivation and spirit of competition. “In regard to that, the most motivating part is not always winning the gold medal after competing with other rivals, but instead, achieving the personal goals and overcoming challenges. Knowing that you solved a complicated situation or came quite close to it inspires you to do great new deeds.”
 

Tamm forecasts several interesting development perspectives. For instance, he thinks that the importance of alternative asset management will grow and the entrepreneur customers will have a bigger interest in fund investments and private banking. There are more and more hard-working people who are not satisfied with the humble interest they get on their bank account.
 

GILD considers its trumps for achieving all this to be the very same clear focus, structure based on partnership and a long co-operation experience – the partners and a big part of the team have managed funds together and carried out transactions for almost ten years. “One of our good sides is the right size – we are not quite an investment banking boutique where the best accomplishments have all occurred thanks to a few shining personalities. At the same time we are not a big financial institution where flexibility and individuality would inevitably diminish. GILD is a unique combination of individual and collective management,” the head of the company says in conclusion.

GILD PROFESSIONAL SERVICES AS 2007
Sales (th EEK) 133,960
Change in sales 224.5%
Net profit (th EEK) 80,532
Change in net profit 319,9%
Number of employees 58
Investments (th EEK) 1,373
Return on equity 103.3%
Place in the Competitiveness Ranking 2008 23