The exit of companies linked to "unfriendly states" (a regularly updated list consisting of around 50 countries, including 27 EU member states, the UK, and the US) is regulated by a complex and constantly evolving legal regime. Investors from third countries are likely cautious of the constantly tightening sanctions regime and rising geopolitical tensions.
While some foreign companies have sold their Russian assets to investors from third countries, such as Turkey or UAE, such transactions are less common. The most valuable assets in strategic sectors, such as energy, are generally acquired by state-owned entities or business groups linked to the Kremlin regime. Such an approach is also supported by Russian authorities, who are keen to demonstrate that domestic entities can manage these businesses just as well (if not better) than their foreign counterparts. There is a significant interest in such assets – often sold at a significant discount – which is giving rise to a new class of influential businesspeople in Russia. The sale of assets to Russian investors is another common approach to exiting. It is noteworthy that a number of foreign companies have built-in back clauses when selling their Russian assets, thereby retaining an option to return to the market at some later point. Such an option is attractive because existing management teams have the knowledge and experience needed to ensure the continuity of business operations and retain employees, which is a priority to many departing business owners and Russian authorities. Looking at different ways foreign companies had exited the Russian market, the transfer of assets and shares to local management has been perhaps the most common approach. However, the share of companies that have completely exited the market remains relatively low. According to the regularly updated company databases by the Yale School of Management and the Kyiv School of Economics, more than a thousand foreign companies have to some extent curtailed their operations or are in the process of withdrawing from the Russian market. The one-year mark of Russia’s invasion of Ukraine has put into the spotlight different approaches multinational companies have taken with regard to their presence in the Russian market. However, companies remaining in the Russian market face a host of reputational risks and an increasingly unfavorable and unpredictable political and operational environment in Russia. Local management buyouts and the sale of assets to Russian investors have been the most common approaches used by foreign companies exiting the Russian market.Ĭompanies from countries deemed "unfriendly" by the Kremlin face a constantly evolving and increasingly restrictive regulatory environment, which makes exiting a lengthy and costly process.
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