Oleg Nikishenkov

The record growth in Russia’s mergers and acquisition market for the first three quarters of this year is not as positive a sign for Russia as it might seem, analysts say.

Some 2,000 M&A deals with a total value of $60 billion were reached in Russia in the first three quarters of 2011, Vedomosti reported Friday. This figure amounts to 20 percent of all deals concluded on the European continent for the period.

To date the highest volume of M&A deals of any year in Russia were recorded in 2007 when over $71 billion worth of deals were conducted.

But Alfa-Bank Economist Natalia Orlova said that this year’s high figures, while promising, could be more of an indicator of limited global economic growth.

“Due to the slowdown of the world economy, companies can only facilitate expansion by acquiring the businesses of their competitors,” Orlova said.

Metropol Stategist Mark Rubinstein said that the data compiled on this year’s M&A activity was misleading since it does not take into account the fact that many of the recorded acquisitions can be put down to businessmen buying back parts of their own companies for tax reasons.

“You need to extract capital expatriation deals to see the real dynamics of direct foreign investment into Russia,” Rubinstein said.

RGM Securities analyst Andrei Treselnikov said some of the biggest deals carried out this year in the metallurgical segment can largely be put down to company buy-backs.

“Usually its because a branch company is registered in a better location for further raising capital, for example in London, as happened with the Polymetal-PMTL Holding deal [$7.3 billion],” Treselnikov said.

Nevertheless, the analysts admitted that the volume of “real” M&A deals was still impressive. The list includes some big names, topped by the Pepsi Cola takeover of Wimm-Bill-Dann, the purchase of Novatek by Total and Sberbank’s acquisition of Troika Dialog. Treselnikov, of RGM, noted that there have also been some significant deals in the logistics sector, such as the acquisition of MPort, which owned the Vladivostok Sea Port, by the FESCO logistics giant.

Last week saw another big acquisition of a Russian company by a global firm when Unilever signed a $694 deal to buy Russia’s Kalina skin-care company. Unilever agreed to buy 82 percent of the Yekaterinburg-headquartered company to increase its presence in the Russian cosmetics segment.

http://www.themoscownews.com/business/20111017/189130165.html