“Ever since the start of the war in late February, the energy, infrastructure, defense, and food sectors have been on notice,” Vainovskis begins. “Still, the war has not actually stopped M&A activity – a few deals may have been put on ice, but not nearly as many as expected – the market has shown a strong resilience, and investors consider the Baltics to be a good opportunity.”
In terms of trends, Vainovskis underlines that the talk of the town is the impact of the EU Green Deal and sustainable finance. “The banks are adjusting their lending policies to facilitate for sustainability-driven projects, with a number of sectors adjusting – primarily energy, construction, waste, and various types of production,” Vainovskis reports. Furthermore, Vainovskis reports a JV between the “largest private equity fund in the Baltics, BaltCap, acting via its Infrastructure Fund, and AJ Power, a major privately-owned energy sector group in Latvia. Solar and wind, especially offshore wind, are the dominating investor interest nowadays,” Vainovskis adds.
Vainovskis also highlights some updates on the capital markets. “Latvia has recently been active in its efforts to develop strong and active capital markets. We have seen a number of IPOs and bond listings by local business on the Nasdaq Baltic market,” he reports. “For example, the DelfinGroup, Indexo, and leading locally owned fuel station chain Virsi have performed successful share offerings and several new issuers are about to access the capital markets."
Finally, Vainovskis reports that the FCMC – the financial and capital markets regulator in Latvia – has taken a proactive role. “The FCMC recently launched an IPO sandbox in Latvia and actively supports other good initiatives,” Vainovskis says. “The idea behind the sandbox is to have potential issuers exposed to a panel of experts and obtain free high-quality kick-off and orientation advice before they proceed with an IPO process,” he explains. The FCMC, according to Vainovskis, is attempting to further stimulate the capital markets ecosystem of Latvia. “It is important because our capital funds, pension funds, local individual investor money should be stimulated to stay within our own economy. There is not a lot of market liquidity at the moment, but past IPOs have demonstrated reasonable stability in face of global capital market fluctuations – so I am hopeful that this adds to the attractiveness of Latvia,” Vainovskis concludes.