The M&A market in Russia: trends in 2024 and prospects for 2025

2024 has been a challenging year for Russian businesses. The escalation of sanctions has led to the disappearance of entire categories of goods, frozen investments, and increased import costs. Domestically, high inflation, an increase in the money supply, and rising wages have forced the regulator to maintain a high key interest rate. These factors have significantly impacted the business climate.

1. Exit of Foreign Businesses

Following the events of 2022, many foreign companies began exiting the Russian market. Some signed sale agreements with buyback options, while others completely divested their assets, incurring losses. In 2022–2023, these companies sold their businesses to local entrepreneurs or investors from friendly countries. These transactions required government approval, often with conditions such as discounts, contributions to the budget, and the preservation of jobs.

By 2024, the number of such deals decreased, as most companies had already decided on their future. However, reports of new major deals continued to emerge weekly. Many investors were unable to obtain approval for sales due to changes in regulations or continued searching for buyers. It is estimated that about 70% of foreign companies remain in the market, leaving potential for further exits.

2. Business Sales Ahead of Tax Changes

Many Russian businessmen, who have been operating in the market for decades, began considering the sale of their assets. One of the reasons was the changes in tax legislation effective from 2025. Now, the sale of shares and stakes held for more than five years is subject to tax if the transaction value exceeds 50 million rubles. For example, selling a business for 1 billion rubles would incur a tax of over 140 million rubles. The personal income tax rate also increased to 15% for incomes exceeding 2.4 million rubles.

Another reason was the difficult economic situation: sanctions, labor shortages, high key interest rates, and inflation have made planning challenging. Many companies faced issues in supply chains and debt servicing, making the sale of businesses a way to preserve capital.

3. Search for Promising Assets

Despite the difficulties, some businessmen are actively seeking projects for investment. This is driven by excess liquidity caused by deoffshorization and monetary policies aimed at stimulating the economy. Exporters are also accumulating funds due to the weakening ruble. The main investors are state-owned companies, private investors, and subsidiaries of large corporations. They are looking for projects capable of showing multiple growth, especially in a high-interest-rate environment. Interest is not only in IT but also in projects that replace goods that have left the market.

Outlook for 2025

The development of the M&A market in 2025 will depend on the global economic and political situation. A reduction in inflation and the key interest rate could increase the number of deals. High-quality assets will remain in demand. It is expected that some assets owned by individuals from unfriendly countries will change hands. Investors from friendly states may also become active market participants if the situation stabilizes.

Overall, 2024 has been a pivotal year for the Russian M&A market. Despite the challenges, it continues to adapt, offering opportunities for both sellers and buyers.