“Act promptly”: how Russian business buys the assets of foreign companies leaving the Russian Federation

The German automaker Mercedes-Benz will leave the Russian market and sell shares in its subsidiaries, including a plant in the Moscow region, to the Avtodom dealer.

This was announced on Wednesday, October 26, in the Ministry of Industry and Trade of the Russian Federation.

“As a result of the negotiation process, we managed to reach the final stage of agreeing on an investment deal.

It is important that this will ensure the efficiency of the plant, preserve highly qualified jobs and competencies,” said Albert Karimov, deputy head of the department.

According to him, the Avtodom company will also deal with the maintenance of Mercedes-Benz cars sold in Russia.

The Ministry of Industry and Trade, in turn, will help the new business owner find a technology partner.

Since the beginning of October, several large foreign companies have already decided to sell their assets in Russia to local investors.

In addition to Mercedes-Benz, such plans were officially announced, for example, by the Spanish chain of clothing stores Inditex (which owns the Zara and Bershka brands), the American Yum!

Brands (KFC and Pizza Hut), as well as the French Danone.

Recall that many foreign companies began to massively leave the Russian market in the spring against the backdrop of large-scale Western sanctions against Moscow.

According to experts, one of the main reasons for refusing to work in the Russian Federation was external political pressure on business.

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“The departure of foreign organizations is mainly motivated by political considerations.

In addition, a set of anti-Russian sanctions also played a role, greatly hindering the activities of businesses and causing them losses, ”Nikolai Vavilov, a specialist in the Strategic Research Department at Total Research, explained to RT.

A similar point of view is shared by the head of the analytical department of AMarkets Artyom Deev.

According to him, those enterprises that initially did not leave Russia later encountered problems in the supply of the necessary equipment, components and raw materials from abroad.

This happened precisely as a result of restrictions from the United States, the EU and other Western states, the interlocutor of RT explained.

“Consequently, the business has estimated that the rising costs will significantly reduce the profitability of the further activities of the divisions.

As a result, now companies are still deciding to curtail production completely,” Deev added.

Control gear

In total, more than 205 of the 600 largest foreign companies in Russia have already restricted their activities.

At the same time, about 130 organizations announced their intention to leave the country, but in fact, no more than 5% of them stopped working, experts from the Center for Strategic Research (CSR) calculated.

According to the study, 69% of those wishing to leave the Russian market sell their local division to a new owner.

At the same time, it is curious that about a third of such transactions provide for the possibility of returning assets to the original owner.

On such conditions, for example, Renault and McDonald's left Russia.

“The new owners of the former divisions of foreign companies act, as a rule, promptly: 90% of their divisions have already officially resumed their activities, which has saved about 150,000 jobs,” the report says.

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According to CSR experts, some industries may still experience difficulties after the departure of foreign business.

In particular, we are talking about a possible decrease in the number of jobs in areas such as catering and IT, as well as limiting access to technology, for example, in the automotive industry and the production of electrical equipment.

Meanwhile, for the economy as a whole, the initiative of a number of foreign companies to leave the Russian market turned out to be uncritical, experts admit.

“The decision of foreign businesses to leave the country on a national scale does not have a devastating effect on the Russian economy, contrary to the statements of some foreign politicians,” the study emphasizes.

In many ways, it is the sale of divisions and subsidiaries to new owners that makes it possible to reduce the negative effect of the departure of foreign enterprises.

This makes it possible to ensure the uninterrupted operation of already established market systems and minimize losses in the labor market, Pavel Sigal, First Vice President of the all-Russian public organization of small and medium-sized businesses Support of Russia, told RT.

“The transition of enterprises to new owners helps to maintain continuity in business processes, leave logistics and technological solutions in the necessary proportions for independent functioning.

Thanks to this, jobs are practically not lost, that is, the business does not suffer serious losses in the labor market, ”the specialist emphasized.

However, the lack of foreign funding and access to the right technology can be a major challenge for new business owners.

However, over time, this problem can also be solved, Fedor Naumov from the PFL Advisors team of analysts is sure.

“As the practice of the sanctions period, which began after 2014-2015, shows, the departure of foreigners stimulates the development of domestic business.

Of course, the displacement of imported technologies is not the same as the import substitution of cheeses, but with proper funding, you can achieve the desired result, ”the specialist believes.

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"Sale for the ruble"

It is noteworthy that foreign companies that left Russia have already lost about $200-240 billion from their decision, the Center for Strategic Research noted.

According to analysts, foreigners are forced to sell their business at a discount of about 70% on average.

In this case, the largest losses are incurred by enterprises in the oil and gas industry, the banking sector, as well as the automotive and food industries.

As Fyodor Naumov explained, difficulties with logistics, capital transfers and finding new clients can take all the attention of top management for months.

In this regard, it is more profitable for many companies to quickly sell part of their business at a discount and concentrate resources on solving other problems, the expert believes.

In addition, according to Nikolai Vavilov, organizations are ready to sell their assets cheaper, because they are afraid of being left with nothing at all.

“Probably, foreign organizations realize that they can simply lose all their Russian divisions if the Russian leadership introduces external management for companies.

Therefore, business makes a decision to “sell for a ruble” its assets with the opportunity to return when the geopolitical situation improves,” Vavilov explained.

According to Artyom Deev, as the degree of geopolitical tension decreases, foreign companies may indeed begin to return to Russia en masse.

However, this process may turn out to be difficult, since the vacated niches in the Russian market will already be occupied by companies from Asia and the CIS countries, the specialist believes.

Fedor Naumov adheres to a similar position.

“Everyone wants to return, even those who had a relatively small business here.

Russia is the largest country in Europe in terms of population.

This is a large potential consumer demand for products and services of foreign companies.

However, the return will not happen quickly.

And whether internal beneficiaries will let them back is a big question,” Naumov concluded.