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Russian M&A Market Outlook 2013 Alexander Nadmitov Helsinki, 27/08/2013.

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Presentation on theme: "Russian M&A Market Outlook 2013 Alexander Nadmitov Helsinki, 27/08/2013."— Presentation transcript:

1 Russian M&A Market Outlook 2013 Alexander Nadmitov Helsinki, 27/08/2013

2 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.

3 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;

4 International expansion Russian companies going global (recent example: acquisition of stake in Jokerit hockey team and Hartwall Areena in June 2013)

5 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

6 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$700 mio. purchase of 48% in, popular Russian social network, valuing it at US$ 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..

7 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 energy- saving 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

8 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)

9 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

10 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 targets 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

11 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.

12 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;

13 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. Strategic types of activity

14 Statistics for 5 years None of the FAS Russia decisions was appealed to court.

15 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

16 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: Website:

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