Russia Partners, a division of Siguler Guff, has become the first foreign investor to make a significant investment in a Russian bank since the onset of the financial crisis.
Russia Partners has taken a 3.3 percent stake in MDM Bank and joins existing investors in the bank such as the European Bank for Reconstruction and Development and the International Financial Corporation.
MDM: a 'special case'
MDM operates both retail and corporate banking services and according to a presentation on its website services more than 27,000 corporate clients, 37,000 small business clients and around 3 million retail clients.
It was formed through a merger of MDM Bank and URSA Bank, which completed in August this year and is now Russia’s largest privately owned retail lender. As of September 2009 the bank had a Tier One capital ratio of 15.3 percent.
Siguler Guff founder and managing partner Drew Guff said the bank was considered “to be the best private sector bank in Russia” in a statement, adding that his firm had followed the banks progress “for many years”.
Brunel Capital, a London-based boutique advisory and M&A firm, brokered the deal and acted as a financial adviser.
When asked whether the deal would herald a rush of foreign capital into the Russian banking sector, Max Atanassov, chief executive officer of Brunel, said that MDM had been a special case among Russian banks. “It stood out because of the quality of management – especially the merged bank, which also has a very strong shareholder group supporting it.”
Atanassov added that a number of foreign private equity firms had shown interest in the MDM deal.
Russia Partners – owned by New York-based private equity investor Siguler Guff – manages more than $1 billion of assets and has been investing in Russia and the CIS since the mid-1990s.
In July this year, during US President Barack Obama’s visit to Moscow, Drew Guff called on the Kremlin to improve the business environment. “We'd like to see laws changed,” he told Reuters. “We'd like to see the environment changed [in a way] that would further promote private equity investment.”