Andrey Cheremnykh: The trigger for the acquisition could be an increase in orders from big clients on the federal level

Jul 22, 2013

Andrey Cheremnykh, CEO and Head of "Asteros Engineering and IT Infrastructure" business unit, commented to Mergermarket, a member of the Financial Times Group, on Asteros M&A prospects.

Asteros, a Russian IT systems integration company, is looking to expand its consulting and business applications arm by making acquisitions, according to CEO Andrey Cheremnykh.

The company would look to grow its consulting capabilities to respond to rising demand from federal programs, including government orders. Asteros is after companies with consulting expertise in investments, management of investments and projects, life-cycle management as well as general integration connected with engineering and technical repair.

Asteros will look at targets with up to USD 2.5m EBITDA and 50 employees. In case of an acquisition, the CEO expects 10x EBITDA multiples to be used. Asteros is looking to own 75% or more in potential targets. The company would finance the acquisition with a mixture of shareholder funds, company cash and credit lines it has opened with banks, the CEO said. He declined to provide its cash on balance.

Asteros would hire advisers to handle the deal as well as to conduct the due diligence.

There is no specific timeline for the deal, the CEO said, adding Asteros acquires one company a year “on average.” The trigger for the acquisition could be an increase in orders from big clients on the federal level.

Asteros’ latest acquisition, made last year, was of a smaller company in the information security space, the CEO said citing no valuation. Other purchases were in IT infrastructure, consulting and information security, where it gained access to new technology allowing it to strengthen its position on the market, the CEO noted.

The company is looking for targets and it is also being approached directly by companies for sale, the CEO said, adding it is currently considering a few options.

Asteros would also consider selling a minority stake to an investment fund, with which it could have “long-term relationship.” There are no concrete expectations in terms of valuations as it would depend on each specific case, the CEO said. The proceeds would be used for project funding as well as partially retained by the shareholders. In case of the stake sale, every owner would offer a part of share, the CEO said.

There are three major owners holding a stake in the descending order, including Yuri Byakov, Andrey Cheremnykh and the Asteros management together with International Finance Corporation. In 2009 IFC provided Asteros with USD 20m of debt financing in exchange for a 2.5% stake and an option to increase its share to 12% through further investments, according to the IFC website.

Asteros had RUB 19bn (USD 582m) in revenue for the 2012 financial year ended on 1 April, a 15% increase on previous year. The CEO expects similar growth this year.

Consulting and business applications account for 7% in the company’s revenue-generation structure. It is aiming to grow other operations organically, including IT infrastructure and engineering systems, information security and IT outsourcing accounting for 80%, 7% and 6% of revenue respectively.

Asteros is also present in Ukraine, Kazakhstan and Turkmenistan. The company is not planning to enter any new market in the short term, having its focus set on Russia itself.

The company, which has more than 1,700 employees, competes with such domestic IT integration as CROC, IBS, Lanit and Compulink.

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