Mid-market eating a quarter of the pie. Mergers & acquisitions in Russia in 2007

24 April 2008 — A PricewaterhouseCoopers report on Russia’s M&A market in 2007 shows that M&A values have grown 61% on the previous year, bringing the year's total deal value to USD 179 billion. The number of deals year-on-year actually fell by 22%, from 1,210 in 2006 to 941 in 2007.

Major mergers and acquisitions and also large-scale IPO’s continued to make the headlines (more than half the activity by value came from just three deals), but 2007 was also a good year for mid-sized business. Deals worth under USD 50 million made up 57% of all M&A activity. The main factors driving the increase in the number of deals in the mid-market are tougher market competition and as a result the need to strengthen positions by attracting extra capital to strengthen and maintain a competitive edge or by introducing new technology or benefiting from the experience of foreign or bigger Russian players. There was a strong trend of divesting non-core businesses, due to tougher competition or as an exit strategy for founding owners over the age of 50.

Michael Knoll, Director and Head of M&A Lead Advisory at PricewaterhouseCoopers commented on the report:

“M&A activity made up 14% of GDP and had a significant influence on the continuing economic growth of Russia. Deals were made possible by a positive market environment and huge international interest, high internal liquidity, a strong rouble and macro-economic stability”.

By deal number the busiest sectors were industrial production (161 deals), utilities (145) and financial services (143). Six of the ten biggest transactions took place in the oil and gas sector, two in metallurgy.

Leading Russian companies continued to expand their M&A horizons beyond Russia with a total of 103 deals made abroad. Precisely twice that number (206) of transactions involving foreign interest in Russian companies were closed.

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