In 2013, the fuel and energy sector was unrivaled in Russia's M&A market accounting for 59.3% of its total volume, an unprecedented dominance of one economy sector in the market. Earlier, none of the industries ever contributed more than 21% to the total amount of transactions, according to the recent issue of AK&M Information Agency's monthly bulletin MERGERS AND ACQUISITIONS MARKET.
The fuel and energy sector registered 42 transactions for a total of $70.02 billion, the largest of them certainly being the purchase of TNK-BP by Rosneft for $54.98 billion in March 2013. Had that heavyweight deal not taken place, the fuel and energy sector would still have accounted for 24% of the M&A market's total volume in 2013. Half of the year's top 15 deals involved oil and gas production assets.
The chemical industry made its way to the second position in the rating of industries contributing to the M&A market in 2013, with 24 transactions for a total amount of $10.79 billion (9.1% of the total market volume). The largest deal involved a reshuffle of Uralkali's majority shareholding structure estimated at $8.9 billion. Pharmaceutics also remains one of the most active segments. In 2013, it accounted for 27% of the total number of M&A events in the sector and 17% of their total amount.
The construction and development sector took one step up the rating reaching the third position in 2013 from the fourth in 2012, with 69 transactions for a total of $6.77 billion (5.7% of the total market volume). The sector was unrivaled in the year-on-year growth of the number of transactions (+44%), outstripping even the oil and gas production segment. The source of this success is the explosive growth of demand for office centers and warehouse complexes in Russia. The highlight of the year in the sector was the purchase by Mikhail Gutseriev's companies of Multinational Logistics Partnership for $900 million in October 2013.
The telecom sector ranked fourth in 2013. Few as they were (15), its transactions reached almost $4.99 billion in value (4.2% of the total market volume), the lion's share of that amount coming from a series of Tele2 Russia deals: in April, JSC VTB Bank acquired 100% of this company for $3.55 billion (including the amount of debt); in October, it resold 50% of the telecom operator to a group of investors including Bank Rossiya for $1.26 billion.
The financial sector dropped to the fifth from the third position in 2012, with 55 transactions for a total of $4.02 billion (3.4% of the market volume). The largest of them was the consolidation of 51% of Nomos-Bank by Otkritie FC companies estimated at $1.18 billion.
The number of financial institutions involved in M&A transactions grew impressively by 31% in 2013, most of the M&A targets (34 out of 55) being banks. However, financial assets are losing value, resulting in a lower volume of the market compared with the previous year (by 38.3%), despite the more frequent deals.
The quantitative comparison demonstrates that investors' interest moved from the real sector towards the development, financial and services sectors in 2013. Only the fuel and energy sector represented the real economy in the group of five leaders in the number of M&A deals.
Besides, investors have rekindled their interest in transport assets, the number of transactions increasing by 36% year-on-year. However, their total amount dropped by 58% year-on-year as the fundamental consolidation trend in the segment of rail carriers (the most expensive assets) came to an end in 2012 and the first half of 2013. As a result, the average deal value in the transport sector (excluding the largest deals) decreased almost 4 times in 2013. Today's most frequent M&A targets in the sector are infrastructure facilities at airports.
The M&A activity in the food processing sector declined seriously in 2013 (the number of transactions decreasing by 16%, the amount by 46% year-on-year) on account of weaker consolidation forces in the key segments (dairy, confectionery, and alcohol products), slower growth rates in the sector, and lower consumer demand. Instead, we note a higher investment in agriculture (primarily, in the plant-growing and beef husbandry segments), the amount of transactions in 2013 increasing by 70% year-on-year.
Of particular note is the IT sector annually doubling its M&A volume in recent years. In 2013, the total amount of transactions in the sector exceeded $1.5 billion (compared with $745 million in 2012, $367 million in 2011). However, the number of transactions is not growing anymore, the higher M&A result being primarily attributable to the increasing value of Russian IT companies. The most frequent targets in the market are systems integrators, online media, and service companies.
In the electric power sector, the amount of M&A transactions soared 5.9 times in 2013, but this growth was entirely driven by the acquisition of Moscow Integrated Power Company (MIPC) by Gazprom energoholding for $2.97 billion, the largest deal in the sector. The number of transactions remains relatively low (only 17 deals for the 12-month period) down to the changed regulatory framework, in particular, the freezing of tariffs starting 2014, and lower financial performance of power companies.
The M&A market in the trade sector continued to shrink. While the total amount of transactions decreased by 11.5% and their number grew by roughly the same percentage in 2012, the number of transactions remained at the previous year's level, but the total amount dropped by 24.7% in 2013. The reason for the M&A activity stagnation and lower transaction values in the trade sector, previously one of the most M&A active parts of the market, is the slower retail turnover growth.
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"AK&M", 13.02.2014 15:32