Mergers and Acquisitions in Russia

Introduction
Mergers and Acquisitions market of Russian Federation
Most civilized transactions in Russian
Mergers and Acquisitions market of Russian banks
Literature

Mergers and Acquisitions in Russia

Most civilized transactions in Russian
The M&A market is found relevant in lots of countries including Russia. The other day the informational agency Bloomberg published its traditional annual market research across the globe. A bit earlier, in the middle of November, the third annual national forum Mergers and Acquisitions of Russia took place. The research results determined the rating of the most civilized transactions at the M&A market [3].
Western M&A markets got used to mergers prevailing over acquisitions, but as for the Russian part, here acquisitions form the major share of dealings. No wonder that record high rates of transactions’ number ($3.1tr in the world and $52-57bn in Russia) have generated a need to conduct an audit for quality of transactions in the RF. The “quality”implies conformance of transactions to world standards. 20 deals made at the Russian M&A market were found corresponding high corporate standards. According to the survey results they beneficially affected the economy of the country. Here’s the list of the most successful and significant transactions:
Russian Aluminum – SUAL – Glencore
Experts gave the top position to the recent merger of Russian and foreign aluminum companies – Russian Aluminum (Rusal), SUAL and Glencore. Rusal controls a wide range of plants dealing with aluminum processing. August 2006 Rusal started repurchase of its own stock in view of upcoming merger with SUAL and Swiss Glencore. The companies merged October 9. Rusal’s share in the joint company made up 66%, SUAL’s – 22%, Glencore’s – 12%.
Guta Group – Factory Krasny Oktyabr (Red October)
The second from the top is Guta Group with its project of the factory Krasny Octyabr’s transfer from the Swamp Island located in the center of Moscow to the territory of the business concern Babayevsky. Both the factory and the concern are the leading sweet and chocolate manufacturers in the RF. The biennial transfer project started in 2005 in the framework of the programs Golden Island and Reorganization and Development of Industrial Areas conducted by the Moscow government. 150 thousand square meters of dwelling space are planned to be constructed at the factory’s former territory. The total volume of investments put in the project exceeds $500 million.
Basic Element
August 2005 the holding Basic Element dealing with machinery, natural resources, power, financial services, construction and development, purchased the controlling stake of the Moscow property developer Razvitiye. Experts believe that the company will definitely occupy one of the leading positions at the real estate market. Today Basic Element is investing $1bn in housing construction in the Moscow Region.
Private investors – Krasin pencil factory (Moscow)
The last positions in the list are occupied by private investors, who bought the pencil factory and took all production facilities to the territory of the plant Mosgormash. All employment positions have been held. A developer project is being implemented at the factory’s former territory these days.
Unfortunately, Russian M&A market still can’t meet the requirements of world standards. At the same time more and more companies introduce their stock to the foreign Exchanges. In this case transparency and scrupulousness of business play a great role.
Mergers and Acquisitions market of Russian banks
Specialists CBR earlier this year predicted that the year in Russia may disappear in about 100 banks. In the same period, financial analysts, particularly active other transactions M & A in the banking sector [4]. Referring in particular to the reviving economy and the intentions of the Russian government to consolidate the banking sector, analysts and the Central Bank of Russia in late 2009 - early 2010 forecast a boom in mergers and acquisitions in the financial services market. Surely you can say that these predictions do not come true and the number of transactions does not increase even when compared with the past, seen as another crisis year 2009. This year, the banking sector, the number of mergers and acquisitions in the domestic market the same as last year. Only "from March 2010 indicated at least three or four deals per month associated with acquisitions, mainly in the format of selling a controlling stake (the merger accounted for about one in four transactions)," said head of M & A news agency AK & M Yaroslav Zabello. Since January by August 2009 experts ISI Emerging Markets counted 45 transactions M & A, the same number of transactions occurred during the same period this year. The only difference - the total value of transactions. Last year it was $ 1.2 billion, in this - $ 1.42 billion.
If we take statistics on M & A transactions, with the participation of Russian banks abroad, the number of deals the picture this year, goes about the same as in the past - 60 deals during the period in 2009 and 58 deals during the same period in 2010 st. But the cost gap is already obtained a decent, noted in the ISI Emerging Markets, - $ 2,29 billion and $ 3.6 billion, respectively. The difference in total cost, according to Mr. Klimov, caused by the same "zero" transactions, which this year is smaller than in the past. According to the head of mergers and takeovers, KPMG in Russia and the CIS by Robert Vartevanyana, the market M & A is always largely depended on the level of confidence, but now this level is low. Thus, the market recovery will happen later than expected, and will depend on fear of recession and public debt in many countries, experts say.Affected, apparently, and reduced interest of foreign investors in the Russian market M & A. "Until 2008, the quality of assets of Russian banks do not doubt. Now, foreigners rarely come on the market, even taking into account the fact that the domestic banking sector is underdeveloped and is not monopolized, as in other countries such as Canada or the Czech Republic" - Maxim says Solntsev, chairman of SDM-Bank.
The current lack of activity on the M & A market experts attributed to several factors. The financial difficulties of some banks, mostly second and third levels, encourage the owners to look for opportunities to sell or the alliance. On the other hand, assets in the banking sector, according to Yaroslav Zabello still sold fairly cheap when compared to pre-crisis period: the current bank is on average one and a half to two shareholders' equity, depending on the brand's branch network and state of assets, whereas before the crisis, the multipliers averaged over three equity. Now the process of forming new banking groups (such as a bank "Orient Express" and bought Kamabank City Mortgage Bank, had previously been attached Etalonbank and the bank "Movement", as in the first half of 2010 there was a formation of the banking group of Trudy Bank, Bank Mint House, and the bank Donbank "Slavic", etc.). Not so long ago completed the merger of the bank "Russia" and Gazenergoprombank. In the long term bank "the County" will be part of "Discovery" is in full swing merger Rosbank and Bank Societe Generale Vostok.
A number of mergers and acquisitions in the banking sector stands out from the statistics. It is a kind of "interception" client bases, personnel and premises of banks. Such tactics, according to Director of Strategy Savings Dmitry Tarasov, in some ways is less risky than traditional transaction M & A, whereby the buyer receives in addition and all the "skeletons in the closet." Interception "in the banking sector are now very often especially in the regions, experts say."However, this is unlikely to become a basic tool: the benefit of purchasing an already existing bank said the brand, the presence of the loan portfolio, etc." - believes Jaroslav Zabello. With the resumption of economic growth and rise in price of banking assets is expected to sanitize the sale of banks that will be expressed to reduce the state's share of the Russian banking system. will gradually be renewed and the expansion of the global world banks on the domestic market, experts predict. The new round of development was due primarily to the development of financial markets, the BRIC countries - China, India, Brazil and South Korea and Japan.
It is worth noting that the lack of dynamics on M & A market is observed not only in Russia. However, in the last couple of months on the world financial market shows signs of a thaw. In late August it became known that two major and, most importantly, financially neproblemnyh U.S. Bank - First Niagara Financial Group and NewAlliance Bancshares - announced a merger. According to preliminary estimates, the transaction value is $ 1.5 billion In addition to the funds will be used in the calculation and action. This will be the first major transaction M & A in the banking sector since 2008. But overall market recovery will happen later than expected. The key factors as to mergers and acquisitions in the banking sector during the second half of the year will consolidate the banks, buying up near-bankrupt companies their more successful competitors, and the establishment of banking groups, writes Kommersant.
Conclusion
The key factors as to mergers and acquisitions in in Russia in 2007:
Greater competition drove consolidation in numerous industries
Domestic firms sought vertical as well as horizontal integration
Foreign strategic buyers sought entry into the fast growing Russian market