Russian M&A review 2017 | KPMG | RU
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KPMG presents the results of a survey of Russia's mergers and acquisitions market in 2017

Russian M&A review 2017

The number of M&A transactions in the past year increased by 13%, while their amount reduced by 12%.

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KPMG in Russia

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In 2017, Russia’s M&A market has grown by 13%. However, the amount of transactions reduced by 12% compared to the previous year and totalled USD 66.9 billion. This downturn was mainly caused by the lack of mega transactions, especially in the oil and gas sector whose transactions in 2016 amounted to more than USD 28 billion. At the same time, in 2017, we witnessed a substantial growth (37%) in the number and amount of transactions other than in extractive industries and energy sector, which have traditionally been drivers of the M&A market – the telecommunications and media industry, consumer sector, and innovations and technology sector got a boost.

The economic rebound has renewed the interest of European and North American investors. The amount of transactions related to purchase of Russian assets by European investors has more than doubled: from USD 1.4 billion in 2016 to USD 3.3 billion in 2017. Meanwhile, the number of transactions related to purchase of foreign assets by Russian investors has not changed. However, the amount of the transactions decreased by two thirds due to a smaller number of major transactions. In 2017, 52% of Russia's foreign investments were investments in European countries.

For main conclusions by sector, please see herein below.

Oil & Gas

— The amount of oil and gas transactions decreased by 54.8% and totalled USD 18.4 billion because of the reduced number of major transactions. This accounts for 27.5% of the total M&A transactions market in 2017.

— Investors from Asia and Middle East remain interested in the assets related to prospecting, extraction, processing, and selling, as well as in those related to technologies. Some European oil companies also continued expanding their business in the sphere of prospecting and extraction in Russia. However, in general, the amount of Russian asset purchase transactions reduced by 18.6% and totalled USD 13.8 billion.

— Russia’s leading companies continue expanding their business in the domestic market by purchasing private businesses and participating in public tenders. The amount of domestic transactions reduced by 67.9% and totalled USD 4 billion.

— Russian companies keep seeking opportunities to purchase and expand business in the international market, especially in North Africa and in the Middle East (including Iran). However, in 2017, the amount of transactions decreased by 95.3% and totalled USD 0.5 billion.

— In spite of the limitations imposed by OPEC, Russia still maintains its leading positions in extraction of oil, keeps attracting investment mainly from Asia and Middle East, and is expected to attract further investor interest.

Banking services and insurance

— Transactions in the financial sector accounted for 13.6% of the total M&A market in 2017.

— The amount of transactions has grown by 738.6% and totalled USD 9.1 billion, of which USD 8.8 billion were gained from domestic transactions.

— In 2017, 31 transactions were executed, which was 29.5% less than the year before.

Real estate and construction

— Transactions in the real estate and construction sector accounted for 11.2% of the total M&A market in 2017.

— In 2017, 77 transactions were executed, which was 24.5% less than the year before.

— The amount of transactions decreased by 10.2% and totalled USD 7.5 billion, of which 6.6 billion were gained in the domestic market.

Metals and mining

— Transactions in metals and mining industry accounted for 10.3% of the total M&A market in 2017.

— In 2017, 55 transactions were executed, which was 96.4% more than the year before.

— The amount of transactions decreased by 21.4% and totalled USD 6.9 billion, of which 3.7 billion were gained in the domestic market and 3.1 billion, from foreign investment.

Innovation and Technology

— Transactions in the innovation and technology sector accounted for 8.2% of the total M&A market in 2017.

— The amount of transactions has grown by 221.7% and totalled USD 5.5 billion, of which 4 billion
were gained from domestic transactions and 1.5 billion, from foreign asset purchase transactions.

— In 2017, 37 transactions were executed, which was 22.9% less than the year before.

— One of the largest transactions in 2017 was made in the innovation and technology sector – merger of Yandex and Uber taxi services worth USD 3.8 billion.

Consumer sector

— Transactions in the consumer sector accounted for 7.8% of the total M&A market in 2017.

— The amount of transactions has grown by 47.2% and totalled USD 5.2 billion.

— In 2017, 71 transactions were executed, which was 97.2% more than the year before.

— A material disinflation, combined with growth in salaries, resulted in higher consumer spending. Therefore, certain signs of recovery began to appear in this sector.

Telecommunications and media

— Transactions in the telecommunications and media sector accounted for 6% of the total M&A market in 2017.

— The amount of transactions has grown by 72.3% and totalled USD 4 billion, of which 2.5 billion
were gained from domestic transactions; 1.2 billion, from foreign investment; and 0.4 billion, from foreign asset purchase transactions.

— In 2017, 57 transactions were executed, which was 32.6% more than the year before.

Chemical industry

— Transactions in chemical industry accounted for 4.9% of the total M&A market in 2017.

— The amount of transactions decreased by 3.3% and totalled USD 3.3 billion, of which 3.2 billion
were gained from domestic transactions.

— In 2017, 12 transactions were executed, which was 20% more than the year before.

Agriculture

— The agricultural sector was the key factor in the recovery of economy. It benefited from the weakened rouble and Russia’s counter-sanctions more than other sectors.

— Transactions in the agricultural sector accounted for 3.5% of the total M&A market in 2017.

— The amount of transactions has grown by 55.6% and totalled USD 2.3 billion, of which 2.2 billion
were gained from domestic transactions.

— In 2017, 63 transactions were executed, which was 53.7% more than the year before.

Energy & Utilities

— Transactions in the energy and utilities sector accounted for 2.9% of the total M&A market in 2017.

— The amount of transactions has grown by 7.9% and totalled USD 2 billion, of which 1.8 billion
were gained from domestic transactions.

— In 2017, 14 transactions were executed, which was 7.7% more than the year before.

Transport & Infrastructure

— Transactions in the transport and infrastructure sector accounted for 2.6% of the total M&A market in 2017.

— The amount of transactions decreased by 5.8% and totalled USD 1.8 Billion, of which 1 billion was gained from foreign investment.

— In 2017, 38 transactions were executed, which was 2.6% less than the year before.

Healthcare and pharmaceuticals

— Transactions in the healthcare and pharmaceutical sector accounted for 0.8% of the total M&A market in 2017.

— The amount of transactions has grown by 20.2% and totalled USD 0.6 billion.

— In 2017, 27 transactions were executed, which was 58.8% more than the year before.

Conclusions of the survey in more detail, as well as the forecast for 2018, can be found in the body of the survey. 

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