Domestic SME, private equity drive Russian M&A

Author: Danielle Myles | Published: 8 Feb 2011

Post-crisis Russian M&A has been driven by domestic small to mid-cap deals, and private equity is picking up through minority investments.

Inbound investments are still governed by English law and structured through an offshore holding company, typically Cyprus and sometimes with a BVI holdco for added flexibility. The task for lawyers with this model is to amend the underlying companies’ articles to conform to the holdco’s shareholder agreement – to ensure the governance agreed at the top level filters through to its ultimate operations.

Russian law’s 2008 recognition of shareholders agreements has gained little traction. The questionable enforceability of tag and drag rights and rights of first offer in particular makes their status too uncertain for most buyers.

Sellers on the other hand often push for a Russian governed transaction. Under local law warranties are generally unenforceable to the extent they don’t relate to the subject matter, says...