AK&M reviews results of Russian M&A market in April 2021

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AK&M 09 June 2021 18:46

The volume of the M&A market factoring in deals valued at no less than $1 million declined against the previous year's performance in April 2021. The total amount of M&A events dropped 2.4 times YoY to $2.12 billion against $5.1 billion a year earlier. However, the number of transactions increased significantly to 66 transactions in April 2021 vs. 37 a year earlier. In ruble terms, the gap between the previous and this year's performance was a bit narrower in the reporting period (down 2.38 times to RUB 157.81 billion from RUB 375.65 billion in April 2020) given the Russian ruble depreciation, as stated in AK&M Information Agency's Mergers & Acquisitions Market bulletin (issue 278).

The reason for this decline is a high base effect, with two transactions worth over $1billion each hitting the market in April 2020, the sale by Anton Cherepennikov of X Holding to entities affiliated with Alisher Usmanov for an estimated $2.17 billion, and the acquisition by Albert Avdolyan's A-Property of a 100% stake in the Elga coal project from Mechel and Gazprombank for $1.93 billion, AK&M analysts emphasize.

Not a single transaction exceeding $1 billion was registered this April. However, the average transaction value increased by 12.6% year-on-year to $32.1 million from $28.6 million a year earlier (net of the major deals).

Finance was one of the most M&A active sectors in April as the Region-Rossium consortium started consolidation of assets of non-state pension funds. The largest transaction of the reporting period in the segment was the purchase by Region Group of a large privately-owned pension fund, NPF Safmar, from the Gutseriev family for an estimated $360.6 million.

Construction and development continued to dominate the M&A market in terms of the number of transactions in April accounting for 40.9% of the total number of transactions in this industry. Furthermore, demand for such assets is unlikely to weaken, despite a noticeable contraction in transaction volumes, for a lot of reasons, including the transfer of housing construction to project financing schemes gradually ousting weaker players from the market. Analysts expect further asset consolidation in the construction market.

Retail businesses, as well as service companies that have been hit hardest by the pandemic, continue to fall in price as the sell - off continues. In the future, we can expect an increase in the activity of large companies, in particular state - owned ones, which can afford to buy assets that have fallen in price. At the same time, it should be borne in mind that many purchases will be too cheap to get into our statistics.

In addition, analysts have noted an increase in the number of asset exchanges within holdings, including state-owned ones, for the sake of optimizing the operation of enterprises, as well as for obtaining tax benefits (for example, in IT) - these transactions will also be out of sight of our statistics.

Retail assets and service companies most severely hit during the pandemic, continue to cheapen as the selloff continues. Going forward, we may see higher activity of major companies, particularly state-owned players which can afford to buy the cheaper assets. It should also be borne in mind that many assets will be valued less than 1$ million and therefore will miss our statistics.

Besides, analysts noted an increase in the number of asset swaps inside holdings, including state-owned holding companies, for optimization purposes and tax benefits (for example, in the IT), these assets will not be included in our statistics either.

More details on the M&A market performance in April 2021 are available in issue 278 of AK&M Information Agency's MERGERS AND ACQUISITIONS MARKET monthly bulletin.