Private Equity in Russia
If you’re one of the aspirants of private equity professionals, you’re at the right place. Here we will go through the nitty-gritty of the Russian private equity market and find out everything you need to know to break into the private equity in Russia.
Without much ado, here’s what we will talk about sequentially in this article –
- Overview of Private Equity in Russia
- Private Equity Services Offered in Russia
- Top Private Equity firms in Russia
- Private Equity Recruitment in Russia
- Private Equity Culture in Russia
- Salaries in Private Equity in Russia
- Private Equity Exit Opportunities in Russia
New to Private Equity? – Start here with Overview of Private Equity
Overview of Private Equity in Russia
It seems that private equity firms in Russia and venture capitalists are trying to take Russia on an international stage.
According to Pitchbook.com, Russia really raised their bar in private equity and venture capital market in the year 2011. And after that, in 2012 and in 2013, both of these markets hit a plateau. Have a look at the chart below and you will get an idea how all of these seem relevant to the overall private equity market of Russia –
The data-points here are only talking about deals till 2013. But still, it can give us a clue about what the Russian private equity market is up to!
If you see the chart, you will see that it all started in the year 2009. The invested amount in the PE & VC deals was $1.706 billion and the number of deals was 33. In the year 2010, the number of deals increased to 53 and the amount invested increased by around 50%, i.e. $2.546 billion.
However, in the year 2011, everything catapulted. The number of deals rose up to whopping 91 deals and the investment amount was doubled, i.e. $6.718 billion. In 2012 and 2013, the PE & VC market didn’t do well. In 2012, the invested amount was $3.452 billion and the number of deals was 82 (what’s noticeable here is that the number of deals didn’t go down much, but the invested amount went down almost half). In 2013, we can see a similar picture – the number of deals was 78 and the invested amount was $3.849 billion.
The question is what made the year 2011 is the most hopeful year in the Russian PE & VC market and why in 2012 and 2013, PE & VC market didn’t do well.
By investigating further, we find out that it’s GDP that made all the difference. In 2009, Russia’s GDP was – 7.8%. We can now understand why the PE & VC market in 2009 didn’t do well! In 2010, the GDP was 4.5%, which improved the numbers in PE & VC markets. However, in 2011, the PE & VC market got their momentum and catapulted to an all-time peak as the GDP in 2011 was 4.3%. In 2012 & 2013, GDP again got stagnated to 1.4% which resulted in the stagnation of the PE & VC market as well.
Also, have a look at these top private equity firms list
Private Equity Services Offered in Russia
Private equity firms in Russia offer various services, but what’s more useful to know how they do serve their customers. In this section, we will first have a glance at how private equity firms in Russia target growth capital and buyout opportunities and then we will get a glimpse of how private equity firms strategize from the point of view of a law firm.
Here’s how the private equity firms in Russia focuses on the growth capital and buyout opportunities –
- Geography: Private equity firms in Russia mainly emphasize Russia’s domestic market and Eurasian Economic Union (EEU) which includes countries like Belarus, Kazakhstan, Armenia, and Kyrgyzstan.
- Focused companies: The Russian private equity market focuses on mid-market companies in Russia and EEU countries. The investment focus is companies that have already completed a few years of operations and are looking for growth capital.
- Sectors: There are few industries that private equity in Russia are investing in – financial infrastructure & payment processing, consumer services, and business & IT services.
- Size of the tickets: Private equity in Russia usually invests in the range of US $10 to $20 million in equity capital deals. In club deals, they go up to the US $100 million. They invest through minority stakes and controlling stakes.
- Investment horizon: They usually see the deal through for 2 years to 5 years and then if the investment doesn’t seem to be profitable, they look for an exit strategy.
- Exit Strategy: Private equity in Russia usually look for two exit strategies. It is either a trade sale or an IPO.
Top Private Equity firms in Russia
According to Preqin, 3 private equity firms in Russia stand out in the last ten years based on the total capital raised. Let’s have a look at them one by one –
- Baring Vostok Capital Partners: It had accounted for almost 32% of all capital raised in Russia in the last 10 years. The firm focuses on few sectors mostly, e.g. oil & gas, financial services, telecommunications, consumer products, and media sectors. The firm mainly emphasizes buyout and co-investment funds.
- Russia Partners: Russia Partners have raised over $1.1 billion in capital commitments during the last 10 years. This firm concentrates on the late stage of growth expansion plans of companies.
- Russian Direct Investment Fund: This firm also focuses on co-investment and growth. The chief sectors this firm invests in are construction, natural resources, and agriculture. It invests in Russia and nearby countries and also in China.
Private Equity Recruitment in Russia
Let’s have a look at how private equity firms in Russia recruit candidates. Have a look at the process below and you would have a good idea about how the whole recruitment is done in private equity firms in Russia –
- Networking: It is one of the most potent tools you can use to get an interview with one of the private equity firms in Russia. All you need to do is to constantly network. You can reach out to the alumni network or Linked-In and try to find out people who are in a similar industry and then mention your willingness to work in private equity. Most grads when they come out have a basic idea about what they want to do in their career. But if you have prior experience in investment banking or audit, it will certainly help you to get an interview offer at one of the private equity firms in Russia. Since the private equity market in Russia is much smaller, if you network intensively, it will certainly help you get through initial overwhelm.
- The need to experience in similar fields: In Russia, you can do an internship if you’re absolutely certain about the path you would choose (e.g. private equity). But just after coming out of graduation, not all students are confident about what they want to do. They can have a basic idea (like finance in a broader sense), but not specifically. That is why it’s better that you get started somewhere. It can be accounting or auditing or investment banking. But if you have few years if experience in any finance-related fields, it will certainly help.
- Impressing the head-hunters: There are two things you need to remember if you want to get through the interviews conducted by the private equity firms in Russia. The first thing you need to remember that you need to impress the head-hunters if you want to get ahead of the “fit” interview. And the second thing is you need to have some kind of experience to impress the head-hunters. The head-hunters must see in you the willingness and the capability the private equity firm is looking for.
- Interviews: The interviews are similar to private equity firms in other countries. First of all, you need to go through a “fit” interview. Usually, head-hunters are hired for the first screening. Once that is done, you will be sitting with the team members of that particular private equity firm. You will answer questions on technical aspects and conceptuality. They will ask you why you want to work in PE! It’s a common question and you should be prepared for articulating the answer properly. The last round would often be the case study analysis where you will be asked to solve a particular challenge. For example, what the fund would pay for a property to earn 32%+ IRR. You need to analyze the whole case, mention how you would solve it, and make a presentation about it. If you are sound in the technical aspect and you have relevant experience in the field, you will find no problem in dealing with the interview questions.
- Language & entry barriers: You need to know Russian for sure if you want to go higher in private equity. Plus you also need to know English since a lot of private equity firms in Russia handle cross-border deals. The entry barriers are never on the surface. But ask any senior person in private equity in Russia and s/he will tell you that 99% of junior private equity professionals are of Russia. The foreigners are there working in the Russian private equity market but in senior posts. So if you want to break in private equity in Russia, then have some experience in the UK or the US and then if you want you can shift to Russia for higher rungs.
Looking to get into private equity – Do have a look this guide on getting into private equity
Private Equity Culture in Russia
As the private equity market in Russia is smaller, the teams are also smaller. As a result, just after joining you would be able to get a lot of exposure and will handle a lot of deals. Moreover, you will know every member through and through. Even you would be able to walk into the room of MD and can talk to him/her about any deal.
But this has a downside too. As the team is smaller, the work pressure is too much and you need to put in a lot of effort since the beginning. As an entry-level professional, you need to do more work than a professional who has a few years of experience. Once you’re promoted to the next rung, you will be doing lesser work (but work that has more value).
Salaries in Private Equity in Russia
Even if Russia has a small private equity market, the compensation is quite good.
The compensation paid to the professionals working in private equity in Russia is as follows –
You can see the compensation of junior level private equity professionals here. It’s a little out-dated, but still, it seems fascinating to see that at a junior level the compensation is so good.
And as you get promoted to the new position, you will be compensated proportionately. In a nutshell, the private equity market of Russia shouldn’t disappoint aspirants at least about the compensation.
Private Equity Exit Opportunities in Russia
Though people don’t leave private equity firms in Russia quite easily, here are four options they usually take when they think about exploring other opportunities –
- The first option is to leave the current private equity fund and jump into some other fund and reach the Partner level after a few years of astounding work (this is not really an exit opportunity).
- You can leave your private equity career and start your own business once you quit.
- You can shift to other countries (developed countries like America, the UK, etc.) and explore opportunities in IB/PE.
- Few professionals leave private equity and join a state-owned corporation. The pay and connections are the dual rewards for working in a state-owned corporation.
Private Equity in Russia is growing and in the near future may become one of the giant markets in the world. If you’re from Russia, you can pursue a career in private equity in Russia. There are a plethora of opportunities. But if you’re a foreigner and would like to work in the private equity market, then it’s better that you work in developed countries first for few years and then you can think of coming to Russia in senior positions in private equity.
This has been a guide to Private Equity in Russia, their services offered, recruitment process, their culture, top private equity firms in Russia, salaries and exit opportunities. You may also have a look at the following article for learning more about Private Equity