Sanctions Slow P.E. In Russia

Aug 5 2014 | 5:33am ET

Russia may be unconcerned by the latest round of sanctions imposed upon it, but private-equity firms focused on the country certainly are.

The U.S. and European Union last week strengthened their measures against Russia—first imposed after the country annexed the Ukraine’s Crimean Peninsula—in the wake of the downing of a passenger airliner, allegedly by Russian-supported rebels in the eastern Ukraine. Russia has downplayed the impact of those new sanctions, but p.e. firms say there are already having an impact.

“In terms of the overall risk perception it’s going to have an impact,” Frontier Ventures’ Dmitry Alimov told Financial News, adding that deals have already been delayed by the new sanctions. “There is a lot of volatility and not every investor is happy with that volatility. Right now a lot of investors are waiting for repricing of deals, they think maybe if I wait a couple of months then I might be able to buy the same company at a better price.”

Holding out for a bargain isn’t the only thing that’s keeping deals from happening: The new sanctions, which cover specific Russian firms and individuals, will increase the amount of due diligence required, to ensure that a deal doesn’t violate the sanctions.

“Any dealing with these banks needs special attention,” Dechert’s Tom Bogle told FN. “If inadvertently there is a violation of the sanctions, it leads to potential criminal liability.”


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