M&A in 2009: The Directions of Regulatory Control

Representatives of the authorities, business people and many experts forecast a serious "second wave" of the financial crisis by the autumn of 2009. This "second wave" is directly connected with the problem of non-repayment of borrowed assets. Therefore the banking sphere is expected to undergo significant changes related to the merging of small and medium-size bank entities to major ones. As a result the banking sector will undergo further enlargement and the majority of small companies have to leave the market.

During the financial unsteadiness the subject of M&A highlights the following main targets: enlargement of companies; integration of assets in order to increase capitalization and creditability; achieve a synergistic effect; consolidation of financial funds and cost reduction.

Along with the government policy focused on the stabilization of the credit-financial system, these advantages become for major banks the determinative ones in choosing the strategy. It should be remembered that in autumn of 2008 the procedures for purchasing blocks of shares of credit organizations by investors were simplified as a more preferable plan of financial rehabilitation of banks. It is referred to as the Federal law "On additional measures for strengthening financial stability of the banking system until the 31st of December 2011" issued 27.10.2008 No. 175.

Within the terms of the realization of the action plan for insolvency prevention, the Central Bank was additionally granted with the right not to apply the series of enforcement measures required by the law for the purpose of creation the facilities for financial recovery. At the moment, the Central Bank continues the rule-making activity referred to as optimization of the procedures of merger and takeover of credit organizations, simplification and cost-reduction of restructuring procedures of credit companies. This is a concrete definition of the requirements to the reputation of credit companies' office-holders, as well as clearly giving information about the bank's activity. Additionally the State Duma is considering a bill "On the amendment of the federal law "Banks and bank activity" which provides the gradual increase of banks' nominal capital up to 90 million to 180 million rubles during the next 3 years.

Under the circumstances of the sudden reduction of the assets liquidity and limitation of borrowed assets market, this variant of development is only affordable for steady holding companies that do not only have free assets, but also an "administrative fund," in other words: the support of the government. The government itself has also considered returning the control of several strategic companies, and is expected to keep participating in property redistribution.

Simultaneously there are measures being realized for further widening the main rights of the anti-monopoly authorities, specifically amendments for complication of the procedures of M&A co-ordination. All this increases the significance of legal consulting and the requirements to the professionalism of the lawyers involved in the process of transactions preparation, seeking the best patterns of calculations, forwarding the necessary expert examinations and co-ordinations, as the market situation is unpredictable and the sellers want to get money for their assets immediately.

M&A projects represent the possibility of getting a company with a team, partners and technologies and moreover with necessary licenses. At the height of the crisis the key ground for the purchasers is the extremely low prices of the offered assets, i.e. "a business sale." The complex of given measures will finally lead to the reinforcement of the power of government in the banking sector.