Tuesday, June 27, 2006

State prohibits cross-border M&A

Contrary to the popular belief in Russia, it is not Europe that is not letting Russian companies into the Western market, but rather it is the state which gives out far too few approvals to cross-border mergers and acquisitions.

As the Vedomosti editorial continues, Mr. Mordashov was one of the lucky ones to get a chance of entering the European market. Since no deal is a sure deal, a failure was a possibility but with the lack of other possible mergers between Russian and foreign companies, each deal that falls through is felt painfully in the country.

Russia is falling behind in foreign M&A. Only 23 percent of all merger and acquisition activity goes to those that involve foreign companies. This compares with the Eastern Europe’s 40 percent Slovakia’s 60 percent and Ukraine’s 95 percent. The small amount of cross-border activity is due to the fact that the government does not allow it, something which incongruent with Russia’s desire to enter the WTO.


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