Natalia Diatlova has shared with Kommersant her thoughts on the latest trends in the Russian M&A market

According to data from 2019, the activity of the Russian market for mergers and acquisitions may have remained at the same level for 2018. The first accurate totals from analysts should be known in the coming weeks. Two years ago, according to a KPMG study, the total volume of transactions in the Russian M&A segment amounted to $51.7 billion, compared to 2017, that a decrease of 7%. However, the number of transactions increased by 18%.

As Natalia Diatlova, Partner at Maxima Legal, told Kommersant, investors spent last year with a wait-and-see attitude, slowing down their investment activity and postponing expansion plans for better times. Natalia explained this was due to a number of reasons, among which was the lack of projects for investment by both the state and business as a whole. “Most of the circumstances affecting the overall activity and macroeconomic trends in the economy are outside the scope of state control. The Russian government plans to continue developing the strategic programme of national projects, while still following a conservative fiscal and monetary policy. In particular, raising the VAT rate to 20% does not contribute to the development of the M&A market and negatively affects projects. In addition, investors are concerned about the lack of information regarding the plans of the Russian government for the implementation of national projects and the predictability of the political situation in Russia, as well as the possible development of the situation after the next set of personal sanctions from the United States and their impact on business in Russia”, commented Natalia.

Natalia also drew attention to a clear trend towards the strengthening in Russian M&A rather than international law. As the lawyer noted, at present, the importance to Russian entrepreneurs of using foreign law when entering into transactions has reduced to almost zero due to “de-offshorisation”. Particularly since Russian law, after the reform of the Civil Code of 2014, can compete with English law that was often applied earlier. However, a number of provisions of Russian law require further development in order to fully implement the tools of English law. “In particular, we are talking about debugging the application of assurances and guarantees, as well as compensation for losses in M&A transactions under Russian law. The appropriateness of applying English law remains only in cases where a party to the transaction is a foreign investment fund or a foreign company who do not consider Russian law as a tool that guarantees protection against unfair behaviour, as well as if the parties wish to be able to resort to international litigation”, emphasised Natalia.

To read the full article (in Russian), please see the Kommersant website >>>