Hard to imagine strategic investor injecting capital in Belarus in 2021 – expert

<p> MINSK, Feb 22 - PrimePress. Maksim Salahub, Partner and head of Sorainen Corporate and M&amp;A in Belarus, told PrimePress about his view on the situation on the merger and acquisition market in Belarus in 2020 and made a forecast for 2021. </p> <p>   </p> <p> Situation in Belarus in 2020 discourages investors </p> <p>   </p> <p> The Belarusian merger and acquisition (M&amp;A) market in 2020 was influenced by country specific factors, typical of Belarus alone. Fears of pandemic impacts observed in March-April 2020 soon receded into the background as the political crisis broke out, Salahub said. </p> <p>   </p> <p> “We have been receiving few requests to enter the market or to execute new investment projects since around July 2020, feeling that the situation was equally discouraging for Western, Russian, Chinese and Belarusian clients,” he said. </p> <p>   </p> <p> Business acquisitions started before the election continued, while some projects were terminated or suspended indefinitely, like the acquisition of two IT companies by their long-time European partner, or strategic investment by a Western construction materials manufacturer in a second enterprise in Belarus. </p> <p>   </p> <p> “Strategic projects on transport infrastructure modernization, heavy industry and in partnership with state-owned enterprises go on, although they are few and their dynamics leaves much to be desired,” said Salahub. </p> <p>   </p> <p> He named M&amp;A deals with Sorainen and other law firms’ consultancy support in 2020: </p> <p>   </p> <p> –     Banks/insurance: (1) sale of Belarusian ERGO business to Euroins Group, (2) sale of Paritetbank to Cyprus-based Beristore Holdings; </p> <p>   </p> <p> –     Industry: German DEG’s investment in Belarus’ sole producer of gypsum-based construction materials–upgraded Belgips enterprise; </p> <p>   </p> <p> –     Zubr Capital investments in (1) Myfin Group banking IT platform and (2) Realt.by real estate ads portal; </p> <p>   </p> <p> –     M&amp;A deals in the IT sector took place as well. Most of them were beyond the public domain. The acquisition of Melsoft, the developer of mega-popular games Family Island and MyCafe by Israeli Moon Active was the highest profile deal. </p> <p>   </p> <p> No enthusiasm for near future </p> <p>   </p> <p> “From the commercial standpoint, the year 2020 was not that bad, but we have no enthusiasm for the near future. It is hard to imagine a strategic investor insensitive to the political situation and this ailing economy injecting capital in Belarus in 2021,” Salahub said. </p> <p>   </p> <p> According to the expert, if the epidemic, political instability and growing economic risks continued, the following types of deals are possible this year: </p> <p>   </p> <p> –     sale of small and medium business (€1-5 million); </p> <p>   </p> <p> –     distressed M&amp;A deals (constrained sale of pre-bankruptcy businesses to competitors); </p> <p>   </p> <p> –     optimization deals inside Belarusian and international groups of companies; </p> <p>   </p> <p> –     direct acquisitions are still possible in the IT sector, particularly in the game development industry; definitely local deals that are part of global projects (for example, a Chinese company buys a U.S. company that has a development center in the High-Tech Park, an asset that has to be built into the entire deal); </p> <p>   </p> <p> –     international companies’ exit from the Belarusian market. </p> <p>   </p> <p> Nuances of investment climate in Belarus </p> <p>   </p> <p> “The new difficulty this year is what and how to tell an international client about the investment environment in Belarus,” said Salahub. </p> <p>   </p> <p> “We can keep talking about tax reliefs for the High-Tech Park, Chinese-Belarusian Great Stone Industrial Park or free economic zones, but it turned out that the benefits may dwindle overnight,” he said. </p> <p>   </p> <p> The Belarusian government is still waiting for and inviting investors, thus expecting them to totally disregard political affairs of the owners, administrations and employees of the companies set up in Belarus. </p> <p>   </p> <p> “We should stay up to date with already imposed or yet possible EU and U.S. sanctions against the Belarusian clients and partners,” said Salahub. </p> <p>   </p> <p> Besides, one should be prepared for Internet shutdowns by government agencies under some circumstances. </p> <p>   </p> <p> “A lot of nuances have arisen in addition to the usual legal conditions for investing and protecting investments,” the expert said. </p> <p>   </p> <p> Belarus has been experiencing a severe socio-political crisis since the summer of 2020. Massive protest actions against the official voting results began in Belarus after the presidential election of August 9, 2020, in which Alexander Lukashenko was declared the winner for the sixth time with 80.1% of the vote. The authorities resorted to a severe crackdown on the protesters. The Internet was shut down in the first days of the post-election unrest, and then the bandwidth was repeatedly reduced during mass protest actions. European Union countries, the U.S., the UK and their allies dismissed the election as rigged and imposed personal sanctions on a group of Belarusian officials, Lukashenko among them, and a number of Belarusian companies. Lukashenko said in February 2021 that the businesses that do not show enough patriotism should better leave the country. He also said that he personally ordered to shut down all businesses that participated in the strike in the autumn of 2020, and to remove a disloyal retail chain from the market. Head of the Republican Union of Industrialists and Entrepreneurs and the Belarusian Scientific and Industrial Association Alexander Shvets said in February 2021 that biased law enforcement practices against private business in Belarus was alarming. End </p> <p>   </p>

2021-02-23

Primepress