Deals come back into vogue after lean start to year

Financial News

Jason Corcoran in Moscow

01 June 2009
The volume of mergers and acquisitions deals in Russia and eastern Europe recovered in April after a barren time for advisers in the first few months of the year.

Data from Thomson Reuters showed the volume of dealmaking in Russia soared to $8.3bn (€5.9bn) during April, compared with $2.4bn and $3bn recorded during February and March, respectively. The number of deals also rose to 340 in April, from 238 in March and 254 in February.

Across eastern Europe, the rally began in March and was just as pronounced. Volumes rose to just under $6bn for both March and April, compared with $1bn for January and February combined.

However, compared with last year, volumes fell 67.5% in Russia and 76% in eastern Europe in the first five months of this year.

The fall would have been greater, were it not for three big deals in the oil and gas sector. According to figures from data provider Mergers.ru, Russia’s M&A market value in the first quarter of this year was $12.5bn – and about half of that came from those three deals: investment group Basic Element acquiring Russian private oil firm RussNeft, India’s ONGC Group’s acquisition of London-listed Imperial Energy, and Gazprom taking control of the NIS oil monopoly in Serbia.

Mergers.ru noted that several deals were likely to close in the second quarter, such as the merger of MDM Bank and Ursa Bank, and South Africa’s Standard Bank taking a 33% stake in Russian investment bank Troika Dialog.

Oil company TNK-BP said it would continue to seek acquisition opportunities in Russia after losing out to Gazprom Neft for a stake in the troubled UK-listed Russian oil producer Sibir Energy.

Apart from the energy sector, bankers believe the buoyant retail and consumer segment remains the most attractive for foreign entrants.

Russian daily Kommersant last week reported that a UK supermarket chain had appointed Goldman Sachs to explore an expansion strategy into Russia. A Goldman Sachs spokeswoman declined to comment.

Wal-Mart, America’s largest retailer, said it might expand into Russia to take advantage of its fragmented retail market while French retailer Carrefour has been circling Seventh Continent, an upmarket grocery chain, for several months.