Updated March 31, 2008

Russian mergers and acquisitions (M&A) market

grew two times in value terms for 2007.

Its volume totaled around $130 billion according to KPMG data.

   "The world investment activity reduction in the second half of 2007 did not influence the Russian M&A market. However, this can affect the possibility of transactions financing in the future.

In terms of the transactions amount increase at only 5% (from 817 transactions in 2006

up to 855 in 2007), the volume of the Russian M& A market has doubled. The conducting of scale Yukos assets' sale auctions and RAO UES of Russia reorganization as well as important high-quality changes, such as price rise of the Russian assets and market transparency increase contributed to this", considers the managing partner for KPMG strategic development in Russia and CIS Mikhail Tsarev.

   M&A transactions' volume in the banking sector has gone down up to $2,6 billion in 2007 from $3 billion in 2006.

KPMG expects some reduction of the transactions' cost volume at their number growth in subsequent years.

Thus, the key role will play not the consequences of liquidity crisis, but absence of large banks available to the purchase.

The activity in the financial sector has somewhat gone down in 2007 as compared to 2006, but remained at high enough level. Because the total volume of transactions totaled around $4 billion. As it is said in the review, it is, first of all, related to the stake reduction in the banking sec

tor, which was partly compensated by the considerable investment of the insurance market.

The volume of M&A transactions in the insurance in 2007 exceeded $1 billion first. More than 90% of this sum falls to the foreign investors' stake, who got interested in the Russian market.

According to KPMG forecasts, the market volume will actually double every four years in terms of keeping the current dynamics.

   The total disclosed value of M&A transactions in the oil and gas sector totaled around $12 billion in 2007 (without the transactions with Yukos assets). Unlike the cost statistics the amount of M&A transactions in the sector has gone down from 90 transactions in 2006 up to 64

in 2007 (without Yukos).

   Metallurgists continue keeping the leading positions by M&A activity. The total cost of concluded

transactions in the industry totaled $19,7 billion, where $14,3 billion falls to the transactions over $1 billion. Moreover, more than the half of transactions in the sector falls to the purchase of assets by the Russian companies abroad, KPMG marks.

   In the consumer sector the total disclosed value of transactions in 2007 totaled $7,7 billion and remained on the same level as compared to 2006. The amount of transactions also remained almost unchanged and totaled around 140 in 2007 against 130 in 2006, and the average transaction value is $55 million against $57 million a ye

ar before.

   In the telecommunication sector 69 transactions to the total sum $5,7 billion were concluded. The volume of M&A transactions in the industry grew by 35,7% as compared to 2006. According to KPMG forecasts, the new horizons for the further industry growth open the development of wide range access and expansion to the foreign countries, among which Asia and Africa are the most perspective.

   In 2007 in the power energy industry were concluded the record number of transactions for more than $25 billion, while in 2006 the volume of transactions totaled $1,3 billion. More than 70 transactions were concluded in the industry altoge

ther. In the engineering the total sum of transactions was $6 billion. The number of transactions also grew: from 43 in 2006 up to 64 in 2007.
In the building, real estate and hotel business areas the volume of the disclosed transactions has closely reached the $5 billion level as compared to $2 billion in 2006.