Expected surge of interest in the Russian business to foreign assets

Fresh statistics on sector M & A, compiled at the request of "F." analysts Mergers.ru, evidence of a change the dominant trend. A year ago, had to admit that the market is experiencing one of the worst periods in history, six months ago - that there are hopes for a gradual transition from stagnation to growth, but now the picture is more rosy. At least in a first approximation. Communications, metals, banks. During January - April completed 279 transactions in which buyer or the object of buying the corporation acted with Russian assets. Most transactions took place in March (80), less - in February (59). Now it is clear that the total figure for the first half noticeably outperforms the corresponding results of 2009 and 2010. And in terms of money ($ 27.9 billion) market for four months, reached even larger volume than could be found for the six months in previous years. Record for this parameter, too, was in March, in which the transaction was completed for $ 8.9 billion in the most modest figure recorded in January ($ 3.9 billion). Branches in the context of absolute leadership belongs to telecommunications. At the sector accounts for 37% of the money market volume. It is noteworthy that almost the same pattern was observed a year and half ago. Only this time, still occupy telecommunications and the largest number of deals (18% of total score). The most significant event here was the merger of assets Vimpelcom and Wind Telecom for $ 6.2 billion, nearly a quarter of the cost "pie» M & A is represented by the metallurgical industry. Especially distinguished "Norilsk Nickel", which sold 8% of treasury stock to metal niderlandskomu Trafigura Beheer BV for $ 3.4 billion more the order of 5% of its consolidated securities "Interros", which increased the capital stock "Norilsk Nickel" to about 30% . The cost of buying these stocks are estimated at approximately $ 2 billion, has also highlighted the financial sector. His high score (15% of market volume) recorded thanks to the scandalous occurrence of VTB in the capital of the Bank of Moscow. The transaction value is estimated at experts Mergers.ru $ 3.4 billion Finally, the five largest transactions other than those mentioned, there is a merger of Novorossiysk and Primorsk ports of trade. On the preparation of the transaction volume of $ 2.2 billion announced in the autumn of the participants, but it was closed only at the beginning of the year. As a result of the transport sector was 9% of the total M & A market in January - April. Two-way traffic. Approximately every four of the five M & A transactions as a seller and buyer were the representatives of Russian business. "After the mass buying assets in 2006-2008, it is time to select the sectors of specialization, the development of new strategies and evaluate how the acquired company prior to the crisis fit into the strict conditions of existence" - says the Deputy Director General of "ROST The project "Alexander Caves. Financial and industrial groups are trying to organize and optimize their assets and close non-core. "Companies are getting rid of mortgages, inherited them from the financial crisis, reducing the number of entities in groups simplifies ownership and optimize the capital structure to reduce administrative costs," - Alexander describes the Crypt. Almost 14% of mergers and acquisitions meant investment of Russian capital in foreign business. If not push off on the number and value of transactions, the proportion is much higher - about a quarter of the total market M & A. Moscow is becoming a kind of financial hub, according to managing director, "UniCredit Securities' Alexander Makarin: that Russian companies, having excess liquidity, seeking to become global players and diversify production, and therefore looking for suitable assets overseas. Excellent potential for mergers and acquisitions, according to Alexander Makarina have such industries as metallurgy, mining and chemical industries. Managing Director of Pollyanna Capital Partners Nicholas Gabyshev as one of the causes of capital flight refers to the approach of Russian owners of the presidential elections and the growing political risks. Foreigners also, paradoxically, in this sense, feel more secure. Some of them prefer to build a business from scratch, but most go to the Russian market through a joint venture with a strong local partner or through purchase of existing facilities, which are considered as a platform for further development. In January - April, about 8% of the total and 30% of the volume of transactions by the acquisition of Russian assets by foreign companies. Portrait in the background. Before the crisis posed a very high bar for the Russian business on the part of business activity. Therefore it is appropriate to compare the present indicators of mergers and acquisitions market with record 2006-2007. Thus, in the first quarter of 2006 was 341 deal, but large transactions almost was not, so the volume of the total market was estimated at $ 7 billion a year later analysts have counted 366 deals for $ 25.2 billion and in the current January - March, the number of M & A reached 210 , the market volume was $ 19.8 billion Judging by the mood of the investment bankers, many of whom speak a large number of transactions that are at work, coming months will bring market performance to a higher level. Leading investkonsultanty Russian M & A Transactions Investment Bank Place in 2010 Volume, Number 1 $ billion Credit Suisse 6,80 April 2, VTB Capital 6.39 March 3 March 4 UBS 5,62 JP Morgan 4,12 May 4 Deutsche Bank 1,60 June 1 Renaissance Capital 1.56 March 7 Lazard 1,15 January 8 January 9 1.12 Savings BMO Capital Markets 0,92 January 10 Morgan Stanley 0,71 February 11 Sloane Square Capital Partners 0,40 Gazprombank 0.30 January 12 February 13 Advance Capital 0,19 April 14 Latum 0.18 February 15 Evli Corporate Finance 0,15 April 16 Baker Tilly Rusaudit 0.10 3 17-18 Goldman Sachs 0,10 January 17 -18 The Raine Group 0,10 January 19 Taiga Capital 0.09 February 20, Troika Dialog 0.09 1 Source: Mergers.ru yurkonsultanty Leading M & A Group of Companies in Moscow a Cleary Gottlieb Steen & Hamilton LLP Freshfields Bruckhaus Deringer Linklaters CIS Skadden, Arps , Slate, Meagher & Flom LLP White & Case LLC 2 Akin Gump Strauss Hauer & Feld LLP Allen & Overy Legal Services Baker & McKenzie - CIS, Limited Baker Botts LLP Clifford Chance Debevoise & Plimpton LLP Dewey & LeBoeuf LLP Herbert Smith CIS LLP 3 Alrud Law Firm CMS Russia DLA Piper Hogan Lovells (CIS) Latham & Watkins LLP Salans Chadbourne & Parke LLP Dechert Russia LLC Egorov, Puginsky, Afanasiev and Partners Gide Loyrette Nouel Goltsblat BLP Norton Rose (Central Europe) LLP SNR Denton Squire, Sanders & Dempsey (Moscow) LLC Source: The Legal 500 What tipped the sector M & A investment bankers? Nicholas Gabyshev, managing partner of Pollyanna Capital Partners: - We are seeing great interest from foreign producers in Russian assets. This is due, on the one hand, the fact that our market is in itself large, consumption grows, the crisis has passed like a - a tendency to prove it. On the other hand, foreigners can obtain higher returns here than on domestic markets. The Russian government also encourages the creation of local companies global players providing all kinds of customs privileges. Finally, the important role played by optimization of logistics costs and the lack of exchange rate risk in case the location of production within the country. As for the Russian owners, there is a twofold sense. Activity returns to the market, so in most cases you can get a good price for the operating and profitable assets, so owners tend to find buyers. However, increasing political risk, unfortunately, encourage capital outflows from the country. Foreigners in this sense simpler: they have longer planning horizon, moreover, they feel more secure, because behind them their government and global laws and principles of business. A Russian owners fear instability, so they prefer to form partnerships and joint ventures with foreigners or sell assets. If the money and invested in the country, it often through some kind of new structures, more protected from the country risk. Alexander Makarin, managing director, "UniCredit Securities": - After the crisis, many mining companies have felt an interest in acquisitions. Geographically, it focuses on the countries of Central and Eastern Europe, since this market is understandable and profitable for the Russian business - the last two years in the region there are many enterprises which are practically the verge of bankruptcy. We see similar assets in the Czech Republic, Poland, Slovakia, Turkey and Austria. For example, "Mechel" time bought the company in Brazil, Romania and Turkey. And we know that almost all first-tier steelmakers in Russia and CIS countries are considering possible sites for acquisitions abroad. Also, an interesting situation in the market of phosphate and potash fertilizers. Today the main consumers of these products - India and China, that is, countries with rapidly developing agriculture. Demand in their markets sufficiently far exceeds local supply, so for many large companies acquiring the assets associated with fertilizer, would serve as an entry ticket to the region as a supplier. In particular, the unique situation in the north-west China, where demand is satisfied only by 30%. This area is of interest to companies in Russia and Kazakhstan. Also by the end of the year we are waiting for the active expansion of Russian companies in Europe. As for the reverse process, you should not expect high-profile deals in the interests of Western investors as prevent problems in their home markets as well as Russian country risks. However, there are exceptions. Thus, the probable arrival of the gold mining companies, as the sector open to foreign investment, and already have positive experience in Russia, the world players, such as Kinross and Peter Hambro Mining. Alexander Caves, deputy director of "ROST Project ": - By the end of the year will continue the consolidation of power, food, telecommunications and food retail industries. It may be more actively go M & A-processes in the agro-industrial complex, because due to last year's drought, many companies found themselves in dire financial straits. You should also expect big deals in coal mining and oilfield services industry (in the latter case, the buyer of assets may be made by foreign players, such as Schlumberger and Halliburton). As disturbing trend was the recent decision of several foreign banks (HSBC, Barclays, KBC) to turn in the direction of Russian retailers or leave the market altogether. At the same time, this means that their share in banking structures will be put up for sale. With care you can provide new opportunities arising from investors in connection with the forced privatization of a number of Belarusian enterprises. These assets are capable of great interest not only to the Russian state corporation. For example, the Belarusian companies from the food, metal and engineering industries may well get all private entities. In general, we do not expect the second half of any sharp rise in volume and number of mergers and acquisitions, no major increase in foreign direct investment. At the same time as a result, the likely increase in the number of transactions in-out (to buy the Russian owners of assets abroad). Michael Butrin, co-director of the Department of investbankovskoy "VTB Capital": - It's safe to say that the Russian M & A market comes to life, activity increases with each passing month. For example, in 2010, according to Dealogic, the total transaction volume exceeded $ 106 billion as of April the same period of 2011 was already $ 40 billion, indicating an upward trend. However, more appropriate to speak about the emerging interest in mergers and acquisitions, the willingness of investors than to take concrete steps. Today's relatively low cost of financing enables even large acquisition, but market participants, both Russian and international, are cautious. For example, the focus of Asian players are companies involved in extracting and processing raw materials. Our country is rich in minerals, and fast-growing Chinese economy desperately needs them. In addition to traditional oil and gas, now look attractive coal, iron ore and various minerals. The great potential demand for a gold mining companies. Activation is seen as among the Russian investors. Players with a stable financial situation tend to take advantage of business development, which opened in the country. Companies are willing to buy competitors, thus increasing, its market share in their segments. Time to do right. And although the Russian market of mergers and acquisitions are still far from pre-crisis rates in 2007, observed in its trends are encouraging. Michael Zhibo, deputy head of investment management, "Troika Dialog": - In the last two years we have seen growth in mergers and acquisitions, and expect that this trend will be observed on the Russian market in the coming months. Many held today, the deal represents a consolidation in certain industries, notably banking and consumer sectors, agriculture, metallurgy and mining. Another trend in M ​​& A is the marked increase in the number of Russian private companies buying assets in CIS and Eastern Europe, especially in states such as Ukraine and Kazakhstan. In the domestic market also completed several transactions in the consolidation of companies around the large state-owned holding companies that are actively developing and are interested in purchasing. Finally, again showing signs of renewed interest of large international players to enter the capital of Russian companies, but this applies only to a few select industries. Ken Chargeishvili, managing director of investment block BCS: - In the classical understanding of sector M & A - is a "complementary product" in relation to the capital market, since it determines the effective market price for an asset. When the asset begins to be assessed below its fair value, comes into play M & A. By participating in mergers and acquisitions, investors contribute to the restoration of market efficiency. In the West, there were many periods when the general market growth catalyst for this transaction were M & A. As for Russia, there is no such relationship can be traced, then there is a need for mergers and acquisitions is determined by the different assumptions than in the West. And, unfortunately, Russia has not yet formed the legal framework that would enhance the activity in the area of ​​M & A. Despite this, there is great potential for the participation of Russian companies of different capitalization in mergers and acquisitions. Many factors have to do so. In particular, the dynamics of stock indices and commodity prices will contribute to the capital inflow into Russia in the coming years. My prediction is that the company's second and third tier will enjoy a special interest from investors, including foreign ones.