Private Equity in Russia | Top Equity Firms | Services

If you are one of the aspirants of private equity professionals, you are 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 private equity in Russia.

Without much ado, here is what we will talk about sequentially in this article: -

New to private equity? – Start with an overview of private equity

In Russia, private equity firms and venture capitalists are trying to take Russia onto the international stage.

According to pitchbook.com, Russia raised its private equity and venture capital market bar in 2011. And after that, in 2012 and 2013, both of these markets hit a plateau. Have a look at the chart below, and you will get an idea of how all of these seem relevant to Russia's overall private equity market.

source: pitchbook.com

The data points here only talk 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 know that it started in 2009. Then, the invested amount in the private equity and venture capital deals was $1.706 billion, and the number of deals was 33. In 2010, the number of deals increased to 53, and the amount invested increased by around 50%, i.e., $2.546 billion.

However, in 2011, everything catapulted. The number of deals rose to whopping 91 deals, and the investment amount was doubled, i.e., $6.718 billion. Unfortunately, in 2012 and 2013, the private equity and venture capital market did not do well. In 2012, the invested amount was $3.452 billion, and the number of deals was 82 (what is noticeable here is that the number of deals did not 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.

What made 2011 the most hopeful year in the Russian private equity and venture capital market, and why in 2012 and 2013 in the private equity and venture capital market not do well?

By investigating further, we find out that GDP made all the difference. In 2009, Russia’s GDP was – 7.8%. We can now understand why the private equity and venture capital market in 2009 did not do well! In 2010, the GDP was 4.5%, which improved the numbers in private equity and venture capital markets. However, in 2011, the private equity and venture capital market got their momentum and catapulted to an all-time peak as the GDP 2011 was 4.3%. In 2012 and 2013, GDP stagnated at 1.4%, resulting in the private equity and venture capital market stagnation.

Also, look at these top private equity firms list.

Private equity firms in Russia offer various services, but knowing how they serve their customers is more useful.  This section will first glance at how private equity firms in Russia target growth capital and buyout opportunities. Then we will get a glimpse of how private equity firms strategize from the point of view of a law firm.

Here are how the private equity firms in Russia focus on growth capital and buyout opportunities: -

• Geography: Private equity firms in Russia mainly emphasize Russia’s domestic market and the 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 on companies that have already completed a few years of operations and are looking for growth capital.
• Sectors: There are a few industries in which private equity in Russia is investing – financial infrastructure and payment processing, consumer services, and business and IT services.
• Size of the tickets: Russia's private equity usually invests $10 million to $20 million in equity capital deals. In club deals, they go up to $100 million. They invest through minority stakes and controlling stakes.
• Investment horizon: They usually see the deal through for 2 to 5 years, and then if the investment does not seem profitable, they look for an exit strategy.
• Exit Strategy: Russia's private equity usually looks for two exit strategies. It is either a trade sale or an IPO.

According to Preqin, three private equity firms in Russia stand out based on the total capital raised in the last ten years. Let us have a look at them one by one: -

• Baring Vostok Capital Partners: It accounted for almost 32% of all capital raised in Russia in the last ten years. The firm mostly focuses on a few sectors, e.g., oil and gas, financial services, telecommunications, consumer products, and media. In addition, 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 ten 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.

Let us look at how private equity firms in Russia recruit candidates. Have a look at the process below, and you will have a good idea about how the whole recruitment is done in private equity firms in Russia: -

• Networking: 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 network constantly. You can reach out to the alumni network or LinkedIn to find people in a similar industry and then mention your willingness to work in private equity. When they come out, most grads have a basic idea about what they want to do in their career. But if you have experience in investment banking or audit, it will certainly help you 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 the initial overwhelm.
• The need to experience in similar fields: In Russia, you can do an internship if you are certain about your chosen path (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 you should get started somewhere. It can be accounting or auditing, or investment banking. But if you have a few years of experience in any finance-related field, it will certainly help.
• Impressing the head-hunters: You need to remember two things to get through the interviews conducted by the private equity firms in Russia. First, you must remember to impress the headhunters if you get ahead of the “fit” interview. And the second thing is you must have some experience to impress the headhunters. 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, you must go through a “fit” interview. Usually, headhunters 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. Next, they will ask you why you want to work in private equity! It is a common question, and you should be prepared to articulate 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? It would be best to analyze the whole case, mention how you would solve it, and present it. If you are sound in the technical aspect and have relevant experience in the field, you will find no problem dealing with the interview questions.
• Language & entry barriers: You need to know Russian to advance in private equity. In addition, you also need to learn English since many 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 from Russia. The foreigners work in the Russian private equity market but in senior posts. So, if you want to break into private equity in Russia, then have some experience in the UK or the U.S.; if you wish, you can shift to Russia for higher rungs.

Looking to get into private equity? – Do look at this guide on getting into private equity.

The private equity market in Russia is smaller, so 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 the Managing Director and talk to them 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 from the beginning. In addition, as an entry-level professional, you need to do more work than a professional with a few years of experience. So, once you are promoted to the next rung, you will do lesser work (but work with more value).

The compensation is quite good, even if Russia has a small private equity market.

The compensation paid to the professionals working in private equity in Russia is as follows: -

source: antalrussia

You can see the compensation of junior-level private equity professionals here. Admittedly, it is a little outdated, but it still seems fascinating that the compensation is so good at a junior level.

And as you get promoted to the new position, you will be compensated proportionately. So, in a nutshell, the private equity market of Russia should not disappoint aspirants, at least regarding compensation.

Though people do not leave private equity firms in Russia 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, jump into another fund, and reach the partner level after a few years of excellent work (this is not 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 investment banking/private equity opportunities.
• Few professionals leave private equity and join a state-owned corporation. Pay and connections are the double rewards for working in a state-owned corporation.

Private equity in Russia is growing and may soon become one of the giant markets in the world. So, if you are from Russia, you can pursue a career in private equity in Russia. There are a plethora of opportunities. But suppose you are a foreigner and would like to work in the private equity market. In that case, it is better that you work in developed countries first for a few years, and then you can think of coming to Russia for senior positions in private equity.

This article is a guide to Private Equity in Russia. We discuss services offered, top companies, recruitment, culture, payscale, and exit opportunities. You may also have a look at the following article to learn more about private equity: -

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