Jan. 18 – Russia saw 15 new private equity funds established last year, but very few newly established and existing funds succeeded in attracting institutional investors, Financial Consulting Group (FCG) says in its report “Private Equity Market in 2011.”
The non-food retail sector – clothing retail, children’s clothing and toys, household appliances, and media retail (movies, music, etc.) – was at the center of attention for private equity funds last year.
The purchase by UCP Fund of a stake in Monarch, the acquisition by UralSib Direct Investment Fund of a stake in Academy, and the announced increase by a Swedish investment fund of its stake in Melon Fashion Group were among the most noteworthy deals.
Some deals were made in the e-commerce sector, the following are particularly interesting:
- Aton Capital Partners became a co-investor in KupiVIP
- More than US$100 million was invested in Russian online shop OZON.ru by the ru-Net, Index Ventures and Alpha Associates funds as well as Japanese online retailer Rakuten, with each receiving a minority stake
- iTech Capital Fund agreed to invest in the fast-growing Internet service Battle of the Brands in exchange for a controlling stake in the company – the project was launched in March 2011 and attracted more than 300,000 active users already in the first seven days of its existence.
The extent of investment into the Russian oil and gas sector by private equity funds was and still is limited due to excessive political risks and high entry costs.
Nevertheless, there were some deals in this sector as well. The most striking deal was the investment by Rusnano and two large private equinity funds, BVCP and Russia Partners, into Novomet-Perm, a manufacturer of submersible equipment used in oil extraction.
Despite the fact that the 2006 to 2009 period saw both strategic and financial investors actively using consolidation strategies in the broadband service sector, there are signs that 2011 will mark the beginning of a new spike in investment into telecommunications.
According to the FCG data, Russia’s private equity market ended up last year with more than 100 closed deals in total, which experts see as a remarkable achievement for the sector.
As for future trends, the 2012 direction of Russian market development, as well as other developed and emerging economics, will largely depend on such factors as the global recession and oil prices.
“If the current situation remains unchanged, the industry is unlikely to see significant growth in 2012. However, the plans of the Russian Private Equity Fund (RPEF) may significantly revive the market both in terms of transaction sizes and sector direction. In addition, it is also likely that global equity funds and the RPEF will act as co-investors, thereby generating investor interest in the Russian market,” Vladimir Lupenko, Financial Consulting Group partner says in a comment to the overlook.
FCG’s review is based on experience in managing pre-investment analysis projects for the 25 largest private equity funds.
