Why international companies sell business assets in Russia to local managers

5 August, 05:06 PM
Adam Jedrzejczak, the regional president of Danfoss in Eastern Europe (Photo:Danfoss)

Adam Jedrzejczak, the regional president of Danfoss in Eastern Europe (Photo:Danfoss)

Why are international companies selling their Russian and Belarusian assets to local management? Danish engineering multinational company Danfoss provided their answer in an interview with NV on Aug 5.

With the imposition of international sanctions on Russia following its full-scale invasion of Ukraine, many foreign companies opted to sell their business in Russia and Belarus to local management in management buyout (MBO) deals. In this way, they declare they have exited these markets. But are they actually just hiding their presence in Russia and Belarus? Not necessarily, says Danfoss from Denmark.

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“There are two explanations to why we choose MBO and not other options,” says Adam Jedrzejczak, the regional president of Danfoss in Eastern Europe. “First, we chose the fastest solution. Secondly, we have focused on completely withdrawing from these markets and doing it in a controlled manner.”

On March 1, the company decided to leave the markets of Russia and Belarus because of Russia's aggression against Ukraine.

After the sale of production assets, the new owners will be able to use the company’s former production lines to make similar equipment, most likely from components produced in Russia, but without the technologies of the Danish company. The use of the Danfoss brand in the Russian and Belarusian markets will also be prohibited.

The deal should be completed in early September, then all assets will be sold to a new legal entity, and Danfoss LLC (Russia) will be liquidated.

Jedrzejczak says that he knows other Western companies that have chosen a similar mechanism for exiting the Russian and Belarusian markets precisely because it allows them to do it in the fastest way and on the terms of the company, not the buyer.

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