Top 30 M&A deals in Russia 2016

TOP-30
Top-30 M&A Russia

The number of mergers and acquisitions in 2016 has increased, it is noted in the new study of AK&M Agency. However, in monetary terms, the market declined. Communications industry came first, while the Energy sector (previous leader) was in the outsiders: unlike the government, the experts considered the privatisation of Bashneft in favor of “Rosneft” as “no change the owner”. The main trend for 2016 was the increase in the number of transactions in the format of a transfer of assets in cases of bankruptcy. Experts expect that this trend will continue.

Following the Russian M&A market overall total volume of the top 30 deals has declined. If in 2015 it amounted to $33,7 billion – in 2016 it fell by almost a quarter to $25.7 billion. This suggests that large companies are becoming more cautious in spending amid macroeconomic uncertainty.

The minimum threshold value of deals has also been declining over the past three years. If in 2013 it amounted to $400 million, in 2014 $300 million, in 2015 to $282 million – this year it dropped to $200 million.

At the same time, this year the largest transaction were in the telecommunications industry and one of the three largest transactions in the market as a whole over the past five years. One of them being the fusion of Italian Telecom operators Wind (owned by VimpelCom Ltd) and 3 Italia (owned by Hong Kong management company CK Hutchison). The cost of this transaction is measured by 3 Italia stake in the amount of 8.1 billion Euro ($8.6 billion). This transaction generated 33% of the total volume of the entire ranking of the top 30 deals this year.

It should be noted that one of the largest transactions of the year 2016 was not included in the ranking. We are talking about that in October “Rosneft” has completed the purchase of a controling stake in ANK “Bashneft” from Rosimuschestvo. The transaction value amounted to 329,69 billion rubles ($5.2 billion). However, in this case, both the buyer and the target are state companies, i.e. a real change of ultimate owner did not happen. Therefore, the transaction is not included in the Top-30.

Compared to the year before there was a shift in the format of the transactions. The M&A market increasingly focused on local transactions (where the assets and the buyer are located in Russia). If in 2015, the Russian investors made 5 transactions abroad (those that are included in the Top-30 rating) worth $5,44 billion. This year only 4 transactions at total of $1.28 billion. But the total value of transactions with foreign buyers of Russian assets due to the already mentioned merger of Wind and 3 Italia grew to $10.86 billion from $6.1 billion a year earlier.

The industry sector structure has also undergone significant changes. If last year the leaders of the rating were construction and energy industries – in 2016 the energy sector has experienced the strongest drop in M&A activity. The rating includes only two transactions of this sector worth $431 million (versus $7.6 billion a year earlier). The main reason for this remains a global decline in oil prices.

First place in 2016 in the top 30 deals is taken by communications industry with 2 transactions totalling $8.9 billion. Construction and development sector with 8 deals at $8.7 billion has moved into second place (down from first place last year).

Third place was suddenly taken by trading industry with 6 transactions worth $3.1 billion. This industry was in a long-term declining trend of M&A activity, towhere this year it changed its pattern to a sharp growth. To a large extent this happened due to the activity of “Safmar” financial group acquiring largest household appliances and consumer electronics cahins “Eldorado” and “M.video”.

At the same time, there is a conspicuous lack of interest of buyers to the real sector. From the manufacturing industry the rating includes just 5 deals (two in engineering, one in metallurgy, one in chemicals industry and other industries). This trend was noticeable 2-3 years ago when the role of infrastructure sectors (development, communication, finance, trade) began to grow. This is due to the negative macroeconomic situation and the prolonged stagnation of industrial production.

The obvoius new trend is 2016 was the growing number of transactions committed in the repayment of the debt. For example, the “Russian Capital Bank” has become the “SU-155” construction company’s reorganization administrator (the transaction is valued at the “SU-155” debt amount of $4.9 billion). Sberbank became the owner of the Moscow business centre called President Plaza in repayment of the debts of the facility owner. And “Eurasia” tower in “Moscow-City” went to the VTB group also in fulfillment of the loan obligations of the former owner. In exchange for the service of debt the coal company “Zarechnaya” and affiliated entities were transferred to the new owner.

Click here to download and see detailed transaction table.

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