Mid-market mergers & acquisitions in Russia: growth or slowdown?

October 8, 2008 — According to the Mergers & acquisitions in the Russian mid-market report released today by PricewaterhouseCoopers, mergermarket and Bowne, there will be a greater number of M&A deals in Russia over the next twelve months, but they will be on a smaller scale. And despite the recent market turmoil and downturn in M&A activity, the overall view among analysts is that the Russian mid-market will remain fairly resilient and will continue to see deals being made.

The report presented at the press-conference today is based on the results of a roundtable discussion with leading senior executives in July this year, as well as market statistics from mergermarket covering deals in the range of €30–300m.

According to mergermarket data, the value of announced mid-market transactions exceeded €7.4 billion in the first six months of 2008, while the number of deals reached 61. By industry breakdown, the Energy, Mining and Utilities sector led the M&A mid-market, both in terms of value and volume. Second place in volume terms was the consumer sector, while third place was shared by the industrial sector in volume terms, and the financial services sector in value terms. Inbound M&A deals reached almost €2.8, representing 38% of all mid-market deals. The US was the most active buyer, with 29% of mid market deals in volume terms. Going the other way, US targets accounted for 24% of the volume of outbound mid market M&A deals by Russian buyers.

Michael Knoll, Partner, Head of M&A Lead Advisory at PricewaterhouseCoopers commented:

“The credit crunch should not have a severe impact on Russia, but companies will face difficulties in raising funds, and particularly debt. The scarcity of debt will lead to an increase in M&A activity in the mid-market, since equity will often be the only source of capital to fund further growth. Furthermore, we will also see some M&A activity regarding financially stressed companies”.

Among other market trends highlighted in the survey relating to M&As, the following may from a mid-term perspective influence the mid-market.:

• The need for capital will be a driver of M&A activity in the mid-market
• The majority of Russian mid-market companies can not afford to list, so the growth prospects reliant on foreign or strong liquidity partners
• Growth prospects and increasing transparency will be attractive to investors

1. For more information and comments please contact: Vera Totskaya or Anna Aristova.
2. About PricewaterhouseCoopers
   
   
   “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
3. About Bowne
   
   Dealmakers depend on the superior technology, performance and service that Bowne Virtual Dataroom™ brings to each deal. Bowne Virtual Dataroom is offered by Bowne & Co., Inc., renowned provider of shareholder and marketing communications services. Dealmakers rely on Bowne to handle critical transactional communications with discretion, speed and accuracy. Compliance professionals turn to Bowne to prepare and file regulatory and shareholder communications online and in print. Marketers look to Bowne to create and distribute customised, one-to-one communications on demand. With over 3,700 employees in more than 60 offices across 4 continents, Bowne has met the ever-changing demands of its clients for more than 230 years. For more information or to schedule a product demo, visit the Bowne website.
4. About mergermarket
   
   mergermarket is an independent Mergers and Acquisitions (M&A) intelligence service with an unrivalled network of dedicated M&A journalists based in 53 locations across the Americas, Europe, Asia-Pacific, the Middle East and Africa. Unlike any other service of its kind, mergermarket specialises in providing forward-looking origination and deal flow opportunities integrated with a comprehensive deals database — resulting in real revenues for clients. For more information, please visit mergermarket.
5. Remark, mergermarket’s publication division, offers bespoke services such as Thought Leadership studies, Research Reports and Reputation Insights that enable clients to assess and enhance their own profile and develop new business opportunities with their target audience. Remark achieves this by leveraging off mergermarket’s core research, intelligence gathering expertise and connections within the financial services industry. For more information, please visit Remark.