Capital flows have little concern for geographical borders – it is returns and investment edge that investors prioritise. So, while there may be a shortage of IPOs in London, there are many exciting opportunities globally, but a lack of experience and regional knowledge can deter investors.
Growing much faster than western mature markets, and characterised by well-educated and younger populations keen to embrace new technology, emerging market economies host many bold and innovative companies primed to leapfrog their counterparts in the West.
Those at the helm of these businesses often aspire to an international IPO or bond issue as vehicles to raise funds and capitalise on an exceptional, and immediate, market growth opportunity – while asserting themselves among the leaders in their global sectors.
However, successfully attracting international investors to a “unique opportunity” located in a largely unknown country is a legitimate challenge – one increasingly placed in front of international PR advisors.
No matter how strong a business’ “track-record”, few investors will venture into the unfamiliar, and many of these markets remain tarnished by historic reputational crises. With a plethora of reasons not to invest, businesses need a compelling counter narrative.
While London capital markets are where Hudson Sandler started 40 years ago, and remain core to our business, we have also spent decades supporting clients in emerging markets to tell their stories and highlight their potential to investors, partners and customers.
Today our footprint includes Africa, through hubs in Nairobi, Lagos, Johannesburg, Cape Town and Casablanca, and in Central Asia, where we advise across the region, with a growing team on the ground in Tashkent.
Explaining what we do to friends back home can sometimes be entertaining. Few of mine know where Tashkent is. Fewer had heard of Bishkek. But once I tell the stories, they are enthralled.
Educating about the market context is a key first element in positioning clients – shedding light on a country or region’s governance, geopolitical relations, economic and political reforms. Fundamentally, it’s vital to paint an accurate picture of these countries as they really are: modernising societies, with rapidly evolving business practices and dynamic trading environments.
This path from obscurity to investability is well-trodden, including in markets closer to home.
The biggest IPO in Europe last year was in Romania. This is a country that until recently had a clear perception problem – hampered by the legacies of its communist history and the notorious dictatorship of Nicolae Ceausescu.
In the past couple of years, my colleagues and I have spent a great deal of time in its capital Bucharest, where a sense of opportunity and entrepreneurialism have been palpable with every encounter. The truth is, Romania stands head and shoulders above much of Europe in terms of its economic growth trajectory, having experienced a 9.01% CAGR in GDP per capita between 2016-2022* compared to the EU average figure of only 1.54%, and it’s predicted to continue this trend, boosted by significant EU funding.
Hudson Sandler was proud to work on that 2023 record setting IPO which was for the country’s largest renewable energy producer, Hidroelectrica, on the Bucharest Stock Exchange. To attract the significant international investor participation that the size of the deal demanded, it was essential to change mindsets and paint the picture of a modern, and thriving, Romania.
Our campaign to position Hidroelectrica as the most exciting investment opportunity of 2023 also called for investors to take a fresh look at the longer-term economic growth prospects of the country fast becoming Europe’s tech centre of excellence, with increasingly competitive living standards, and the expectation of being upgraded to MSCI emerging market status in the coming year.
The Bucharest Stock Exchange welcomed the record EUR 1.9billion transaction in July 2023, supported by investors from the UK and across Europe. Many years of Romania’s major corporate governance and financial market reforms were recognised with this achievement, and it has opened up opportunities for other Romanian corporates looking to raise international capital. Hudson Sandler is now working with a number of these market participants, drawing on our unique understanding and appreciation of the Central and Eastern Europe region.
Of course, trust, once won, is easily lost, and investors need transparency and consistency. Communications cannot stop after a successful fundraising. By their nature, emerging markets evolve quickly, carry higher risk, and there is much to explain along the way. But there is also plentiful opportunity for those who understand the operating environment and can take an informed view of the risk/return profile.
