KPMG: Russia Offers Opportunities For Investors

by Tatiana Smolenskaya, Tax-News.com, Moscow

21 August 2009

According to a recently published poll, international private equity investors view Russia as offering significant investment potential in 2009.

The Russian Private Equity Survey 2009, conducted by KPMG, showed that 73% of international respondents thought that Russia would be the emerging market offering the most investment opportunities this year.

The survey's findings were based on research conducted by KPMG in Russia between December 2008 and February 2009, and canvassed the views of 42 private equity houses based in Western Europe and the USA for its international sample, in addition to 30 Russia-based private equity houses.

Of those questioned for the KPMG survey, 73% believed that energy, mining and utilities sectors will provide the most attractive returns in the near future, with 71% of international respondents thinking the same of the consumer sector.

Approximately three quarters of all respondents believed that low valuations and distressed situations will be the most significant drivers of merger and acquisition (M&A) activity in the short term.

Those polled by KPMG also suggested that lower valuations mean that many companies will only dispose of assets in the short term if they are forced to do so out of economic necessity, with 70% of the Russian sample considering that oligarch-funded private equity houses may, over the year, opt to exit investments to provide liquidity for the owners' core businesses.

Macroeconomic volatility was cited as the main obstacle to private equity investment by 89% of the international sample of KPMG's respondents, and 77% of the international sample felt that knowledge of the Russian market is the most critical factor for successful M&A transactions in Russia, a view supported by the vast majority of Russian respondents.

Thomas Dix, KPMG's Head of Transaction Services in Russia and the CIS, confirmed this, observing: "One of the specific challenges of doing business in Russia is the requirement for local knowledge and connections. International houses will, in my view, struggle without a strong local presence."

He went on to add: "Due to the lower growth prospects of the Russian economy, the value creation capabilities that international [private equity] houses can bring are increasingly important. Therefore, I expect to see more international players cooperating with Russian houses in the future."

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