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Declaring plans to hold an IPO or opening a company for strategic investors has become a matter of good manners for Russian businessmen. This trend penetrated in almost every industry – extractive companies, financiers, retailers and distributors announce these plans. The implementation of these endeavors has become an idée fixe for a number of companies.
The best proof for this statement is a growing number of Russian companies listed on the Alternative Investment Market of the London Stock Exchange in 2005 and 2006. The volume of debt (excluding that of Rosneft) capital, raised form IPOs in domestic and foreign markets is expected to be $10-20 billion, much higher than in the record-breaking 2005. Last year, Russian companies gained $4.23 billion in IPOs at the London Stock Exchange, or 14.4 percent of the total money, raised at the exchange, according to the Interfax news agency.
Strategy of Acting
Several years ago, Russian hoped to attract foreign investments and international corporations to prove the country has a market economy. This time around, Russian companies are increasingly aware that if the access to the domestic market becomes more complex, the market will remain exceptionally lucrative. It is not purely political interests that defend Russian business in oil and gas industries.
The Soviet past has left a trace on the memory of owners and employees of corporations. Spirit of entrepreneurship determines the course of development for a lot of Russian companies. It means they will use all energy, intuition and capital they have to jump at any chance they see on the market.
Heads of Western corporations may spend a lot of time considering an issue and the fact whether it meets he company’s goals and portfolio. Russian businessmen, in contrast, will act in the way that will be the most profitable in their opinion. The time that passes in Russia from endorsing a project to its implementation is extremely short. Only a few countries have can less time for this process – India and China may be on this list. Staking so much, Russians often win. However, they end up having strange corporations which join businesses that can be hardly joined. Time will pass by, and these corporations will depreciate.
However, the recent dynamics and change of the market made businessmen and managed focus on acting rather than on considering. The development strategy is turning into the art of experiments. As a result, strategies of foreign companies are more transparent and easy to understand for the rest of the world. It is easy-to-understand strategies that secure credibility at exchanges in London and New York.
Markets will not make exceptions for Russian companies, despite the persistence and experience of Russian management.
Money Smells
There is still a big gap between expectation of Russian companies' owners and reality of the market. It is not worth thinking overseas investors to pay more than Russian ones. The expectation that Western investors are willing to pay over the fair price and not interfere in the management brings frustration to the two parties.
Not all Russian companies need to have strategic or financial investors. Quite on the contrary, it is natural that companies with strong technological or market positions will enter the international market. Severstal’s attempt to save Arcelor from a dubious merger proves the strength of the Russian business. The company has spent many years on modernizing production and investing in order to play a key part in the global consolidation of ferrous metallurgy. But the majority of Arcelor’s shareholders did not like the thought that quite a close Russian company may play this part.
In fact, money does smell for most people in mainstream international business. It takes more that PR campaigns to win favor of owners of international companies. It is crucial for Russian companies to show that they have read and digested the international code of conduct and use it in practice.
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