Top 30 M&A deals in Russia 2015

TOP-30
Top-30 M&A Russia

In the year 2015 –  452 M&A transactions took place involving Russian companies. This is 10.7% less than in the year 2014 (506 transactions), and the lowest figure for the last six years. Good point in time to launch our web-site www.acquisition.ru

The volume of M&A in dollar terms over the year remained almost unchanged and amounted to $47.15 billion.

More than a quarter of the volume of Russian M&A market in 2015 has been shaped by two major transactions: the purchase of “Stroygazconsulting” group of companies by Gazprombank and UCP which is estimated to be over $7 billion, and the consolidation by Said Kerimov’s structures of controlling stake in Polyus Gold for $5,29 billion.

Construction and development sector in 2015 has demonstrated a record growth rate. The amount of transactions increased 3.1 times compared to 2014, with $4,29 billion to $13,35 billion (28.3% of market volume) is the maximum rate for the industry over the past six years. First of all, this result was achieved due to the already mentioned purchase of “Stroygazconsulting” group of companies . However, even excluding this transaction, total value of transactions in the sector increased by 48% over the previous year.

In second place in the ranking of the sectors for 2015 was the fuel and energy industry where there were 24 deals for $8,84 billion (18.7% of market volume). The most active player in the M&A market in the industry in 2015 was DEA Deutsche Erdoel, which is owned by an investment company LetterOne created by the owners of Russian “Alfa-group”. In October they signed the largest deal of the year in the industry (had signed an agreement to purchase 100% E.ON E&P Norge which operates in the North Sea) for $1.6 billion.

Third place in the ranking of industries by the end of 2015 was taken by the mining and quarrying (except fuel) where there were 10 transactions totalling $5.45 bln (11.6% of market volume). The largest of these was the already mentioned transaction with Polyus Gold.

Transactions with banks still account for the biggest share of M&A activity in the financial sector (65%). However, there are not many reasons for optimism. According to the statistics – restructuring was the main way of transfer of ownership of banks in 2015.

Withdrawal of foreign shareholders from Russian banking system continued on due to the low yield because of ruble devaluation and the decline in lending. Over the past six years Barclays, Straumborg, Societe Generale, WestLB, KBC group, GE Money, PrivatBank, the DNB group, DFE, ICICI Bank, Royal Bank of Scotland, Santander Consumer Finance sold their Russian branches.

Among the sectors showing growth in M&A activity in 2015 are agriculture and information technology. Agriculture remains one of the fastest growing sectors in the Russian market M&A. In 2015, the largest transaction in the last six years was the purchase by Thai holding Charoen Pokphand Foods of poultry farms “Severnaya” and “Voyskovitsy” in the Leningrad region for $680 million.

Deals in the argicultural industry were stimulated the “import substitution programme” after the imposition of the embargo on the import of products from the EU. At the same time in M&A involbed are mainly large agricultural holdings that are adding to their land banks. Small and medium-sized agricultural companies that have high debt combined with falling profitability don’t have the resources for business expansion and transactions.

Information technology in 2015 demonstrated the highest level of M&A activity over the last six years. In October the industry saw the big deal since 2010: – South African media company Naspers announced the purchase of the 50.5 percent of the Swedish Avito Holding, the portal  providing consumer-to-consumer and business-to-consumer sales services via the internet site Avito.ru for $1.2 billion.

Thanks to the deal with Avito total amount of transactions in IT in 2015 reached a record value of $1.92 billion, an increase of 32.6% in annual comparison. The number of transactions was also the highest for six years — 33 transaction. But at the same time, the average transaction value in 2015, excluding the largest fell more than two times to $22.7 million. This is due to the overall reduction of the IT market in Russia and the sharp fluctuations of the ruble, which is especially important for companies that have a high proportion of imported equipment and software products to core business.

In 2015, the Russian M&a market remained mainly local. Domestic transactions (where the assets and the buyer are located in Russia) accounted for 78% of total deals and 69% of their value.

With regard to the dynamics of cross-border transactions in 2015 marked – it is a remarkable change in the trend. Transactions involving foreign buyers of Russian assets (out-in) for the past six years has traditionally been more than the foreign transactions of Russian companies (in-out). But in 2015, the gap between them was the highest – foreigners bought almost twice as many Russian companies, than Russian buyers have acquired assets abroad (67 transactional versus 34, respectively). In addition, for the first time since 2010 the amount of transactions by foreign investors involving Russian assets exceeded the amount of cross-border transactions of Russian companies.

Foreign transactions of Russian companies is more or less notable market share in only a few industries: oil and gas, real estate development, telecom and information technology. In particular, DEA Deutsche Erdoel, which is owned by an investment company LetterOne created by the owners of Russian “Alfa-group” has made a major cross-border deal 2015 as mentioned above.

Given the large share of oil and gas revenues in the Russian economy, falling oil prices causing a recession in a number of directly and indirectly related industries, from production equipment to real estate development and services. However, much more important was the devaluation of the ruble, which leads to the depreciation of the financial resources of the companies and reduces their ability to commit transactions.

Taking into account the fall in production and sales and reduced lending, companies may have difficulty attracting the necessary funds for M&A. They have to make deals, relying mainly on its own resources, in addition to the uncertainty regarding the future prospects of the economy.

Click here to see detailed transaction table.

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