Russian M&A Market
Outlook 2013
Alexander Nadmitov
Helsinki, 27/08/2013
Main Trends in 1H 2013
• Twofold decrease in M&A activity: US$13,4 bln.
against US$27 bln. in 1H 2012
• Most investors – from Russia, less international
buyers (85% buyers – Russian companies)
• Foreign investors active in oil&gaz/real estate:
– BP buys 5,66% in Rosneft for US$4,87 bln. as part of
TNK-BP deal
– Morgan Stanley Real Estate buys Metropolis retail mall
in Moscow for US$1,2 bln.
Dominance of state-owned
corporations
• Acquisitions by state-owned companies on
rise (hidden nationalization)
– US$54 bln. purchase for 96,51% of TNK-BP (oil) by
Rosneft, 03/2013
– US$2,9 bln. for 49% in 100% consolidation of Itera
(gaz) by Rosneft, 06/2013
– US$2,3 bln. purchase of Russian assets of Tele2 by
VTB (2013, telecom);
• Expansion of Russian state corporations
abroad: purchase of DenizBank by Sberbank;
International expansion
• Russian companies going global (recent
example: acquisition of stake in Jokerit hockey
team and Hartwall Areena in June 2013)
Divestures
• Metals and mining companies are divesting of
loss-making foreign subsidiaries –
restructuring their businesses (Mechel sold a
number of assets in USA, Romania, Bulgaria,
Ukraine, Kazakhstan)
• Russian companies become mature like other
international players
• IT/Internet business gradually replacing
traditional industrial sector
Rise of IT / Internet sector
• In 2011 Russian Internet market became the largest in
Europe and online trade shows two-digit growth every
year
.
• Rise of venture
and private equity deals in Internet/IT
sector: (US$700 mio. purchase of 48% in Vk.com,
popular Russian social network, valuing it at US$ 1,5
bln.)
• IT companies going public:
– Qiwi IPO on NASDAQ, 05/2013 at valuation of US$884 mio.
– Luxoft IPO on NASDAQ, 06/2013 at valuation of US$550
mio.
Venture Investments: 2012
• 201 reported deals of US$910mio. in total
–
–
–
–
–
US$792 mio. invested in IT startups
US$108,4 mio. (18) in industrial technologies
US$10,2 mio. (15) in biotechnologies
12 exits for US$372 mio.
3 deals above US$100 mio. (2 cleantech: JV on energysaving glass, polysilicon manufacturing, microchips)
• More competition among startups, more
specialization among funds, funds invest more in
startups who survived early stages of
development, lack of angel investors
State Development Agencies and
Investment Funds
• Skolkovo Fund (gives grants) in 2012:
– Industrial technologies –US$75,8 mio.
– IT – US$26,5 mio.
– Biotech – US$16,7 mio.
• Rusnano (prefer investments over US$100 mio.,
particularly in nanotechnologies)
• Russian Venture Corporation (state fund of funds)
• Russian Direct Investment Fund
• Vnesheconombank (VEB)
Legal aspects
• Most of transactions under English law
• through offshore SPV/ holding companies –
mostly Cyprus (following Cyprus crisis – switch to
other jurisdictions)
• Russian law issues to consider:
– antimonopoly filings
– investments into strategic companies
– notary certification for transfers of participation
shares in limited liability companies
– mandatory offers for open joint stock companies
Antimonopoly requirements
• Thresholds for RF FAS clearance:
– by total value of assets – 7 bln. rubles (EUR 162 mio.)
or by total revenue – 10 bln. rubles (EUR 233 mio.)
– total value of assets of target’s group – 250 mio.rubles
(EUR 5,8 mio.)
• Acquisition of:
•
•
more than 25%, 50% or 75% shares in Russian joint
stock company, or
1/3, 1/2, 2/3 participation shares in Russian limited
liability companies
Investments into Strategic Companies
• Acquisition of control over a strategic company by a
foreign company requires preliminary clearance by
the Russian government
• Acquisition:
• more than 50% of the voting shares of a strategic
company;
• more than 25% of the voting shares of a strategic company
owning a subsoil plot of the federal importance.
• Other transactions aimed at the transfer to a foreign
investor a right to determine decisions of the
management of a strategic company.
Strategic types of activity
geological studies and (or) exploration and mining operations
on subsoil plots of federal significance;
extraction (catch) of aquatic biological resources;
activities related to production, development,
distribution, etc. of aviation equipment and arms;
work on modification of hydro meteorological or
geophysical processes and phenomena;
activities related to use of infectious diseases;
activities related to nuclear energy and materials;
Strategic types of activity
development, production, distribution, maintenance (except
banks) of encryption (cryptographic) means;
identification, development, production, sale of electronic
devices intended for secret information;
implementation of the television and radio broadcasting;
activity of a natural monopoly entity;
provision of communication services by entity with
dominant position at the market;
printing activities or activities of the editors and (or) publisher
of the periodical publication.
Statistics for 5 years
None of the FAS Russia decisions was appealed to court.
Recent experience
• Acquisition of US$100 mio. minority stake in
Russian bank, June 2013
• Acquisition of 40% in microfinanicng
organization, June 2013
• Sale of startup company in electronic payments
to two venture funds, December 2012
• Sale of sea port under construction for US$100
mio., November 2012
• 35 antimonopoly filings in 1H 2013
Our contact details
Alexander Nadmitov
Managing Partner
Nadmitov, Ivanov and Partners Law Firm LLC
Address: Office 1302, Entrance 6, 12
Krasnopresnenskaya Nab., Moscow, 123610, Russia,
Phone: +7 (495) 649-87-12
Fax: +7 (495) 649-87-21
Email: alexander.nadmitov@nplaw.ru
Website: www.nplaw.ru