PwC Optimistic about Russia’s M&A Mid-Market Prospects

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Nov. 19 – Russia’s merger and acquisition mid-market was less affected by the crisis as compared to the overall M&A market, PricewaterhouseCoopers stated in its survey named “Regained Confidence: Mid-Market M&A in 2009–1H 2010.”

The overall M&A market has not yet recovered, but investor confidence is returning and macroeconomic forecasts are positive.

Even more, statistics show that the value of mid-market deals in the overall M&A market increased from 22 percent in 2009 to 27 percent in the first half of 2010.

While mid-market M&A activity held up better than deal activity in the large cap space, overall deal numbers and the total value of transactions declined to 47 in the first half 2010 as compared to 64 in 1H 2009 – almost a 27 percent decrease y-o-y.

In its survey, PwC was looking at transactions with an enterprise value of up to US$250 million. Over the last year, the average size of a mid-market deal has slightly decreased, from US$110 million in 1H 2009 to US$109 million in 1H 2010.

In value terms, the decrease was similar: the value of mid-market deals was US$5.1 billion in 1H 2010, and in 1H 2009 it was US$7 billion.

The country’s M&A market shows signs of stabilizing with increased activity in the retail, consumer and real estate industries as well, which have contributed most to the M&A mid-market, accounting for 45 percent of all mid-market activity in terms of value.

Retail and consumer is one of the fastest growing and strongly developing sectors in Russia, occupying third place in terms of deal value (US$580 million) and number (6) in 1H 2010, compared to US$390 million and five deals in 1H 2009.

“Given the pick-up in business, we believe that the year will end on a promising note that will provide for a good foundation for 2011 – when we expect to see a significant increase in transaction activity,” Michael Knoll, partner, Head of M&A Lead Advisory, PwC considers.

Despite these positive developments, the Russian economy faces a number of challenges: it still depends greatly on oil and commodity prices, the infrastructure needs improving and the demographic issue needs to be addressed, PwC experts’ mentioned in the survey.

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