Commercial and technical due diligence in Russia

The problem

VTB Capital (VTB), the private-equity arm of one of Russia's largest banks, was in talks to acquire Tele2 Russia, Russia's fourth-largest mobile operator with 22.7 million subscribers from the Tele2 group. VTB required a due diligence report on the target company before it submitted its final binding bid – the due date for the binding bid was in a record three weeks and full confidentiality was required throughout the process.

The solution

Analysys Mason was engaged by VTB to perform commercial and technical due diligence on Tele2 Russia, and to assist with negotiations. The focus of the project was on future market development and options to acquire LTE-suitable spectrum, as well as on a technical review of the network compatibility with LTE deployment. We also worked with VTB in developing a business plan with several scenarios for the company, focusing on market sizing and capital expenses.

We based our work on interviews and interaction with Tele2 Russia and group management, as well as on a review of data-room documents and publicly available information.

The result

Our work made it possible for VTB to gain a clear picture of the value drivers and risks related to the target company. On 4 April 2013, VTB successfully concluded the transaction, acquiring 100% of Tele2 Russia's equity for USD2.5 billion and taking over USD1.1 billion of debt, for a total enterprise value of USD3.6 billion.