A study by top law firms found that high interest rates may encourage mergers and acquisitions in Russia, even though Western sanctions and a lack of liquidity among buyers will likely limit growth for the time being.

The study found that the Russian M&A market will grow by only 2% to $39.2 Billion in 2024. This is due to the fact that interest rates have risen to the highest level in over 20 years, at 21%, and Moscow has tightened the terms of exit for Western companies who are selling their assets after the conflict in Ukraine.

According to the study, which gathered the opinions of 20 Russian law firms and M&A advisory companies, increased investor uncertainty caused by trade wars due to tariffs introduced by U.S. president Donald Trump has contributed to M&A pressure in the market so far in 2025.

In the study, 84% of respondents said they expected to see a rise in deals this year where businesses are forced to sell their assets to larger companies that can service their debts.

According to the study, capital-intensive industries such as real estate, infrastructure, and heavy industry are the most affected. This could include Western companies that are still trying to sell Russian assets.

After a 1% reduction last month, the benchmark interest rate in Russia remains at 20%. Government officials and business leaders continue to exert pressure on Russia's central bank to lower borrowing costs faster.

Anatoly Klinkov is the director of investor relations for A101. He said that some companies try to sell specific projects in order to reduce their debt load.

Klinkov stated, "But in this case the market is on the side of the buyer." Money is expensive.

Buyers have more bargaining power and less competition when rates are so high.

In some industries, like the coal industry, there have been an increase in bankruptcies, and companies are being forced to shut down. A Russian Railways document from May showed that major exporters had cut their planned volumes of rail exports as the economy in Russia slowed.

Pavel Terentyev, of Advance Capital, said that in tight monetary policies we are likely to see an increase in the number of deals for trouble assets and reorganization projects.

(source: Reuters)