Wealth of Information about Russia’s Merger & Acquisition market Revealed
Comment: Investment in Russia by UK companies is both desirable and profitable suggests a new report.
A report by CMS Legal reveals the scale and size of the Russian M&A market pointing to a much more vigorous approach by foreign investors.
Despite an overall fall in both the number and value of M&A deals done in 2011 reflecting the European and global slowdown, inbound deal making by foreign companies saw 70 deals made a
collective €21.2bn – a 21% increase in volume and a 116% increase in value from the 55 inbound deals worth €9.8bn registered in 2010.
The third annual CMS Deal Drivers Russia, an extensive review of the Russian M&A market, reveals that Russia saw a total of 214 deals announced in 2011 worth €53.8bn, compared to 223 worth €57bn in 2010.
The largest deals tend to be in the energy, mining, oil and gas sectors, but one of the liveliest hubs of M&A for foreign investors has been the consumer market. Both US and UK acquirers have kept a particularly close watch on this industry, which in recent years has attracted PepsiCo, Walmart and a host of other global conglomerates.
The next year will still present challenges. Compared to 30% last year, 46% of respondents this year believe lenders are pressuring Russian businesses to alter their capital structure. At the same time corruption (29%), bureaucracy (25%) and legislation (22%) are identified as the top obstacles to doing deals in Russia, followed by political risk and a lack of viable targets.
The majority (56%) of aggregate M&A deal value came from the energy sector in 2011, followed by the financial services sector (12%).
Private equity firms in Russia are expected to focus primarily on private companies (42%) or on divestments from larger corporations (32%) in the next 12 months.