In January 2013, the number of transactions in Russia's M&A market increased by 17.2% to 34 from 29 in January 2012, their total amount by 7.2% to $3.133 billion from $2.923 billion, according to the recent issue of AK&M Information Agency's monthly bulletin MERGERS AND ACQUISITIONS MARKET.
Adjusted for the US dollar exchange rate, the growth rate was a bit lower (6%), a positive result anyway after last year's bad slump. "In January 2012, both the number and amount of transactions dropped 24-25% year-on-year, giving the impression of prolonged winter holidays, whereas the business activity went up at once after the New Year holidays this year," Yaroslava Zabello, Head of the Analytical Center, AK&M Information Agency, points out.
Average deal value increased to $92.2 million against $65.1 million the year before (+41.6%). The Integral AK&M M&A Index also showed a marked growth against 2012 and 2011 (132.72 points in January 2013, 16.4 points above the January 2012 result and 10.9 points above the January 2011 result).
The main driver of the M&A market revival was the improving financial results of Russian companies. According to the Federal State Statistics Service, the companies' balanced financial result in 2012 increased by 9.9% to RUB 7.7 trillion from RUB 7 trillion the year before. This "safety cushion" had a positive impact on the mergers and acquisitions market, the companies more willing to deal.
However, insufficient borrowing opportunities impede market development. In 2012, loans to non-financial businesses increased by 12% (half the 2011 growth rate, and much below the consumer lending growth rate). "The lack of long credit facilities prevents the Russian market M&A from showing its worth," Yaroslava Zabello comments.
Another piece of good news is that the M&A market does not revolve around cheap assets these days. The number of transactions involving companies of the low-price segment ($1-10 million) declined to 12 transactions in January 2013, comparable to the early 2012 level (11 transactions), but clearly below 2011 (20 transactions). Their actual share in the total number of transactions was 35% against 45% in 2012.
On the contrary, the number of transactions involving assets in the $11-50 million price range increased to 13 from 9 in January 2012 and 11 in January 2011. In the $101-$500 million segment, the number of M&A events increased to 6 against only two in January 2011 and four in January 2012.