The impacts of the global crisis on the Russian M&A market
The crisis on the global financial markets will force Russian companies to activate their activities on the mergers and acquisitions (M&A) market, according to Ruben Vardanian, chairman and CEO of Troika Dialog, an investment banking group, one of the key players on the Russian corporate finance market. “Now, the time is very good for M&A deals, because crisis also means time for new possibilities, at it was the case in Russia after the 1998 default,” he noted.
Vardanian expects further growth in the volume of M&A deals, despite the current liquidity deficits on the Russian financial market, as transactions in different formats such as swapping of stakes, emission of convertible bonds, debt acquisitions, etc., will continue on the market. This trend will prompt the redistribution of the spheres of interests among the key players in different sectors of the economy, especially in the real-estate, agro, retail and banking industries, where the M&A deals are expected to be massive. “This is because, companies, including banks, which have hitherto thought they could go it alone as independent entities, will now be forced into seeking mergers/acquisitions so as to avoid bankruptcies.”
“Now, the time is very good for M&A deals, because crisis also means time for new possibilities, at it was the case in Russia after the 1998 default."
Expected to lead the coming wave of M&A deals and wholesale acquisitions of the cheapening stocks of Russian companies will be structures affiliated with the local billionaires with competent trading capabilities. However, they are expected to face tough competition from foreign investment funds specializing in working on collapsing markets, which, according to Vardanian, are expected soon on the Russian market. This is because these funds will face little opposition, as Russia, in the banker’s words, “currently lacks really competent professionals, capable of working in conditions of falling markets.”
Vardanian sees three probable exit scenarios from this current global financial crisis. The first, and probably, the most optimistic scenario, envisages the crisis winding up soon, with the whole situation, including on the Russian market, fully normalizing by the first quarter of next year. The second scenario, which is more probable, but less optimistic than the first, envisages the crisis extending over 1.5-2 years, during which “all the current ‘rules of the game’ on the markets will be totally changed, and their extent cannot be predicted at the moment.”
"The most optimistic scenario envisages the crisis winding up soon, with the whole situation, including on the Russian market, fully normalizing by the first quarter of next year."
However, the worst scenario, according to Vardanian, is the total collapse of the whole global financial system. “This could be the ‘nuclear winter’ because after such collapse, the whole world will slide into a shock state as global markets will be become frozen for some time, just like what happened after the August financial meltdown in Russia in 1998.”
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