Russia » Economics

Russia: number one on merger/acquisition market

In 2003 Russia has become the world's number one power on the market of mergers and acquisitions in Eastern Europe.

Assessed market value of mergers and acquisitions has risen from $7.5 billion to 23.7 billion in one year. It is worth mentioning that Russia made more than half of the deals with Eastern Europe. Even without such mega-mergers/acquisitions as TNK-BP and Yukos-Sibneft of last year, Russia continues to appeal to foreign and domestic investors alike.

 In times when the entire world experiences global recession (a total number of mergers and acquisitions has decreased by 23% in 2003), a number of mergers and acquisitions in Eastern Europe has significantly grown for the past year alone. A total amount of mergers/acquisitions in nine countries of Eastern Europe (Bulgaria, Croatia, Czech Republic, Poland, Hungary, Romania, Slovakia, Slovenia, and Russia) has equaled to $38.6 billion in 2003. Russia in turn was the main moving power, declared the Pricewaterhouse Coopers Company that has been conducting research on the countries of Central and Eastern Europe since 1997.

Overall, a total of 1176 merger/acquisition deals of private and state companies have been signed in the region last year. A number of deals of the so-called mega-mergers worth $100 million and more has also significantly increased. According to the experts from PWC, those mega-mergers had a major influence on the overall market growth.

Growing number of privatized deals is also responsible for such steady market growth in Russia. Other European countries have already been through the process of privatization in the course of the past decade. Hungary, for instance, has practically already sold out all of its state-owned resources. In Russia however the process of privatization has been in process for years and still remains in process.

That is why, despite Russia's impressive results for the past year, Russian market of mergers and acquisitions still possesses tremendous potential. PWC experts consider that companies in the oil/gas field, automobile industry, metallurgy as well as the market of financial services will most likely be the next objects for acquisitions. “It is not a secret that today's structure of Russian banking sector presumes its future consolidation—acquisition of small and average regional banks by Russian and foreign banks—by leaders in the field,” states Nick Hockins, a PWC representative.

In the meantime, such mergers as British Petroleum-TNK and Yukos-Sibneft turned out to be the most significant deals of the past year in Russia. “Without a doubt, such mega-mergers appear to be the key factor of today's market; they stimulate other companies to actively participate in this business of mergers and acquisitions,” considers Nick Hockins. “However, even despite these two major business deals, Russia still occupies the leading position in the field of mergers and acquisitions…”.

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