Moscow Times 22 May 2012
by Troika Dialog
The start of 2012 was pretty gloomy for M&A bankers; 2011 had just finished on a very uncertain note, and politicians in Europe were unable to plug the stream of bad news about the European crisis. And although it was not nearly as gloomy as the start of 2009, expectations for M&A bankers in 2012 were quite low and representative of the overall mood on the market as both market and M&A volumes have historically been pretty correlated elsewhere in the world. Not in Russia, however, as M&A volumes remain, high here and seemed little effected by the market prices, as there a set of deals for any set market conditions.
The hopes for privatization deals in tough market conditions was limited. Although, some hopes remained that privatization will continue regardless of the mood on the market that could have locked some revenues for M&A bankers and helped them make some money.
With expectations for privatization delayed Bankers are in search of other m&A ideas. In theory, Russia is an M&A paradise. There is an abundance of innovative ideas.
Theoretically, if you’re a tycoon and you are bold enough, you can buy Gazprom, LUKoil, TNK-BP, Uralkali or Norilsk Nickel, financing the purchase with collateral and then paying out the loan from the company’s dividend stream. You can spend $30 billion buy Surgutneftegaz, which owes $30 billion in cash and then get oil assets for free. Or you can buy Mosenergo, which is the size of Ukraine in terms of gas consumption.
Yet, this is all theoretical. In reality, the number of people who can stage a deal like this in Russia can be counted on one hand. With that in mind, consolidating Bashneft, Norilsk Nickel, MegaFon, or Uralkali can be planned by any banker in theory, but in reality it can only be done by those who drive around Moscow in limos surrounded by bodyguards in separate vehicles.