OREANDA-NEWS. September 17, 2009. According to the PricewaterhouseCoopers survey "Sustainable prospects: mid-market M&A in Russia in 2008-1HY2009", the share of mid-market M&A deals as compared to the overall M&A deal value in Russia grew steadily between 2007 to 2009 from 18% in 2007 to 31% in 2008 and to 36% in the first half of 2009, reported the press-centre of PricewaterhouseCoopers.

The PwC survey focused on mid-market deals (i.e., those with a value of between USD 50 million and USD 250 million), which were completed between 2008 and the first half of 2009.

Despite the overall and marked slowdown, the M&A mid-market demonstrated a stronger resilience to the crisis than the large cap M&A market segment and, for a number of reasons, is also expected to recover faster than the rest of the market.

In the years leading up to mid-2008, the growth in the Russian M&A mid-market was robust. Market participants observed an acceleration in both the number and volume of mid-market M&A deals in 1H 2008.

When the global financial crisis finally hit Russia in 2HY 2008, M&A mid-market activity contracted within a relatively short period. The number of mid-market M&A deals amounted to only 117, as compared to 202 in 1HY 2008. Moreover, only 63 deals were made in 1HY 2009. In value terms, the decrease was also significant: from USD 23.6 billion in 1HY 2008 to USD 13 billion in 2HY 2008 and down to USD 7 billion in 1HY 2009.

Furthermore, the share of deals at the lower end of the mid-market segment (USD50m to USD150m) slightly increased from 52% to 55% if one compares 1HY2008 to 2HY2009.

The majority of mid-market deals in 1HY 2009 were in the utilities and oil and gas sectors—these represented 17% and 15% respectively of all mid-market deals in Russia. Moreover, the mining sector was among the key sectors based on deal value, whereas e.g. in the retail and consumer sectors deal activity dropped over the same period.

Michael Knoll, partner, Head of M&A lead advisory, PricewaterhouseCoopers in Russia:
“We believe that, as the economy begins to pick up, the retail and consumer sectors will be one of the most attractive for investors, including foreign buyers, of the Russian M&A mid-market”.

In terms of the number of deals, 234 deals were done domestically, 103 inbound and 45 outbound over the period 2008 to 1HY2009. Inbound transactions mostly involved buyers from Western Europe, Eastern Europe and the CIS. The most popular sectors among foreign buyers in terms of deal value were retail and consumer (17%), real estate (12%), utilities (12%) and banking and capital markets (12%).

Russian companies were mostly interested in making acquisitions in Western Europe, Eastern Europe, and the CIS countries.