M&A Up $46.8Bln, But Still Off

The volume of mergers and acquisitions on the Russian market showed annual growth in 2010 of $46.8 billion, but no structural changes were seen in the field, which remains skewed by a few big foreign deals.

“The first impression of a balanced market with a strong share of cross-border transaction does not reflect the underlying deal activity,” said a report released by the international accounting and consulting firm KPMG.

The price tag attached to MA activity in 2010 was $95.6 billion, up from $48.8 billion in 2009 — but still well shy of the 2007 pre-crisis high of $159.4 billion.

The three largest transactions in 2010 and the first quarter of 2011 — VimpelCom‘s purchase of Wind Investments, LUKoil‘s buyback of 19.2 percent of its shares owned by Conoco Phillips and BP’s 9.5 percent purchase of Rosneft as part of a $16 billion share swap — represented about one-third of total MA value.

The communications and media sector accounted for 35 percent ($33.5 billion) of all deals, the oil and gas sector for 21.2 percent ($20.3 billion) and the metals and mining sector for 10.3 percent ($9.8 billion).

However, Russia accounts for less than four percent of the global volume of MA — and, without a few big foreign deals, the sphere would consist almost entirely of domestic activity.

The KPMG report highlights that, of the MA activity recorded in the first quarter of 2011, 47 percent was inbound — foreign companies acquiring Russian assets. This is a significant upsurge on the 2010 figure when only 14 percent of total activity was inbound.

The BP-Rosneft share swap, included in the figures, however, has not been finalized and is facing a slew of legal challenges from BP’s billionaire partners in TNK-BP.

KPMG said they expected MA activity in Russia to continue to grow through 2011. The fulfillment of the promised privatizations of state-controlled companies will play a significant part in this process, the report said.

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