The M&A market in the agro-industrial complex experienced a downturn in 2025 but may revive in 2026 as the key interest rate decreases. In this context, the outcome of a deal largely depends on how it is structured. In this article we will examine corporate law instruments for structuring agribusiness deals in connection with the current economic situation.
For the M&A market in the agro-industrial complex, 2025 proved to be one of the most challenging years in recent memory. According to expert estimates, the volume of deals in the sector nearly halved — down to RUB 161 billion from RUB 329 billion the previous year — while the number of deals fell from 85 to 57. The number of large transactions (over RUB 1 billion) more than halved. According to data from Rosselkhozbank, the APK and related sectors market contracted by approximately 38% in dollar terms, while the average deal size decreased by nearly a third.
The reasons for the downturn are well known to market participants. First, the wave of deals connected to the exit of foreign companies — which had largely driven market activity over the previous three years — has been exhausted: in 2024 there were about five such deals, while in 2025 there was effectively just one. Second, the high key interest rate made debt financing expensive, prompting buyers to finance acquisitions primarily through their own funds, making them more selective. Third, the gap in valuation expectations has widened: sellers are guided by their invested capital and asset values from a period of higher returns, whereas buyers base their calculations on the current macroeconomic environment and, with expensive money, apply lower multiples.
Forecasts for this year appear more favourable. As the key interest rate declines, the convergence of positions between parties becomes more likely, and deferred demand may return — particularly in processing, vertical integration, and niche segments with stable domestic demand. Analysts also identify new drivers: privatisation of state-owned assets, resale of companies previously bought out from foreign owners, and — crucially for an industry that took shape in the 1990s and early 2000s — a generational succession of owners, many of whom are now over sixty, with heirs not always willing to continue the business.
Across all these scenarios — whether an owner is selling a business, attracting an investor, buying out a competitor, or transferring the business to a partner — the outcome of the deal is determined not only by the agreed price but also by how the deal is legally structured. And here, Russian businesses have an opportunity that did not exist ten years ago. The 2015 reform of the law of obligations introduced instruments into the Civil Code that were previously known only in foreign legal systems, while recent restrictions have made the abandonment of foreign holding structures mandatory in many cases. A deal can now be effectively structured under Russian law. Let us examine the main instruments used in this context and their connection to current market conditions.
Choosing the Deal Structure
The acquisition structure is the first decision the parties make and one of the most significant: it determines the tax burden, the scope of risks transferred to the buyer, and the range of required approvals. In the current environment, the choice of structure is increasingly determined by the objective the deal serves — whether it is a change of ownership, capital raising, or divestiture of a non-core or distressed asset. In practice, four main models have emerged.
Direct acquisition of shares or participatory interests in the operating company is the most common approach. According to practitioners, it accounts for more than half of all deals, and this is precisely how large agricultural holdings typically consolidate regional players. The buyer acquires the asset of interest without including superfluous holding-level entities in the deal perimeter: each additional legal entity introduces risks of its own violations, tax claims and litigation, while its due diligence and administration require additional costs. Direct acquisition of a Russian company by a Russian buyer also avoids the application of "de-offshorisation" rules and reduces costs. This largely explains the observed trend of businesses reducing the number of foreign links in their corporate structures.
Acquisition of shares or participatory interests in a holding company is justified when the business is already organised as a group and it is more convenient to transfer control as a whole. This model is not uncommon in the final stages of foreign owners' exit transactions, where the asset was historically held through a foreign holding structure. However, the convenience comes at a price — the same additional risks and costs of superfluous legal entities, increased scrutiny from tax authorities, and, in the case of foreign holding structures, the need to apply foreign law and undergo approval procedures. In the current environment, non-Russian holding structures increasingly prove to be a source of complications rather than convenience.
Entry into capital through an additional share issue or increase in authorised capital differs fundamentally from the two previous models: the investor's funds go not to the seller but to the company itself. This structure has now taken on particular significance. With the high cost of bank credit, owners are increasingly attracting investors into the capital not to exit the business but to replace expensive debt and finance development while retaining their stake. According to Rosselkhozbank's observations, it is precisely such deals — aimed at raising capital rather than selling — that began to emerge in 2025, and their number may grow further in 2026. When choosing this model, procedural timelines should be considered: increasing the authorised capital of a joint-stock company involves an additional share issue registered with the Bank of Russia and takes about two to three months, whereas the procedure is substantially simpler in a limited liability company.
Finally, acquisition of individual assets allows the buyer to obtain only the necessary property — land, grain elevator, equipment, trademark — leaving the seller with the legal entity itself and its liabilities. This model is typically used when due diligence reveals serious risks in the company that the buyer is not prepared to assume. In a cooler market where the number of distressed and low-margin assets is growing, such situations are becoming increasingly common. At the same time, this model has significant drawbacks that alter the deal economics. The proceeds from the sale of assets go not to the owner but to the seller company itself, and their distribution incurs additional taxation. Moreover, asset sales are generally subject to VAT, and the seller may incur profit tax. Furthermore, rights to licences and permits, contracts, and employment relationships do not automatically transfer to the buyer. In agribusiness this is particularly tangible: the re-registration of land rights, veterinary and phytosanitary permits, lease and supply agreements — and in some cases the consent of counterparties — is required. Therefore, asset acquisitions are advisable when the risks associated with the legal entity itself outweigh the costs of re-registration.
In the agro-industrial complex, the choice of structure is largely predetermined by the specific characteristics of the key asset — land. The law imposes a strict restriction: foreign nationals and legal entities, as well as Russian companies in which the foreign participation share exceeds 50%, may hold agricultural land only under a leasehold right. If a plot is owned by such a person, it must be alienated within one year, and failure to do so may result in forced sale through auction. This means that an acquisition by a foreign or foreign-controlled investor of an agricultural holding that owns arable land requires preliminary structuring: the land bank must either be carved out into a separate Russian company controlled by residents, or the foreign participation share at the landowner level must be kept below the threshold, or ownership of the land must be replaced with a long-term lease. In one transaction involving the acquisition of a grain asset by a foreign holding, the land had to be separated from the rest of the business — the arable land remained with a separate company under the control of a Russian partner, while the processing facilities and trading house were acquired directly by the buyer.
Land is not the only factor influencing the deal structure in the agro-industrial complex. Licences and permits tied to a specific legal entity (such as those for the circulation of alcohol-containing products at distillery operations or veterinary permits), subsidies and grants received with conditions on targeted use and potential reimbursement, as well as lease and supply agreements that often include change-of-control provisions, all carry significance. If these assets and permits are tied to the company, it is preferable to acquire the company itself, preserving the entire legal framework. If value is concentrated in individual assets while the legal entity is burdened with risks, asset acquisition is more justified.
The Role of Due Diligence
The instruments listed above are not applied in isolation but are calibrated based on the results of due diligence. Its importance in the current market is particularly high: there are more assets on offer, but as market participants themselves note, many are "empty" — the seller often lacks even the documentation necessary for a transparent transaction. In agribusiness, the scope of due diligence has distinct sector-specific features. The following are subject to review: title and history of land plots, validity and terms of lease and sublease agreements, existence of encumbrances and easements, conformity of the land category and permitted use to actual operations, licensing and permits, targeted use of subsidies and grants, environmental risks and the status of employment relations; increasingly, the availability of qualified personnel on site is also a focus, as the asset loses value without it. The results of the review are subsequently reflected in the contract: identified risks are addressed through indemnities, uncertain ones through representations and warranties, and the most material ones become conditions precedent or grounds for price reduction. This is why due diligence shapes the entire deal configuration and should not be reduced to a mere formality.
Contractual Instruments for Risk Allocation
The foundation of a modern business sale and purchase agreement consists of five constructs introduced into the Civil Code by the 2015 reform. Their significance lies in enabling a fairly precise allocation of risks between seller and buyer, and doing so within the framework of Russian law. Over the past decade, these instruments have evolved from legal novelties to established contractual practice; their application and interpretation have been consistently affirmed by the Supreme Court of the Russian Federation in its Plenum rulings of 2016–2018 and in current judicial practice, which has significantly enhanced the predictability of their use.
Representations and warranties (the mechanism is governed by the Civil Code) are statements by the seller regarding the condition of the company being acquired, upon which the buyer relies in making its decision and determining the price. In a market where sellers are often poorly prepared for transactions, representations become the primary means of allocating informational risk. In the event of inaccuracy of representations, the law provides the injured party with several remedies: damages or a pre-agreed penalty, and in cases of material inaccuracy, the right to withdraw from the contract. Additionally, in cases of fraud or material mistake, the transaction may be challenged under two articles of the Civil Code.
Representations form an extensive list, the negotiation of which typically becomes a subject of separate discussions: the seller seeks to narrow the wording, limit it to the "to the best of its knowledge" standard and establish materiality thresholds, while the buyer pursues broader and more unconditional representations. In transactions with agricultural assets, this list has sector-specific features: clear title to land plots and conformity of their permitted use to actual operations, absence of undisclosed liens and attachments, as well as hidden accounts payable and tax claims, validity of licences and veterinary-phytosanitary permits, and lawfulness of receipt of subsidies and grants. It should be noted that representations and warranties insurance, widely used abroad, is still underdeveloped in Russia, so the primary burden falls on the contractual mechanisms themselves.
The indemnity obligation, known in foreign practice as an indemnity, serves a different purpose. Unlike representations, it applies not upon breach of contract but upon the occurrence of a predetermined event — regardless of fault and without the need to prove the amount of damages or causation. Such obligation is autonomous in nature: it remains effective even if the contract is declared unexecuted or invalid, and the court, as a general rule, may not reduce the agreed compensation amount. This instrument is particularly in demand when purchasing distressed assets and in situations where the seller has undergone restructuring shortly before the transaction — the tax and other risks associated with it are logically addressed through indemnities.
For instance, when the parties have already identified a specific risk during the due diligence stage, it is accounted for in the contract without turning a potential dispute into a litigation over breach: a likely tax assessment, the outcome of a pending land dispute, costs of remediation of a contaminated plot, or the risk of reimbursement of a previously received subsidy. Sellers often also undertake indemnification for the inaccuracy of certain representations — thereby converting "soft" warranties into an obligation with defined monetary consequences. In one deal, this approach was used to address a VAT assessment risk identified during a tax audit: the seller undertook in advance to bear its financial consequences, allowing the transaction to close without awaiting the outcome of the tax audit.
Option structures (option to enter into a contract and option agreement) allow the performance of the deal to be spread over time. By its nature, an option is an irrevocable offer that the other party may accept within an agreed period upon the occurrence of specified conditions, typically for a separate fee (option premium). A "call" option gives the buyer the right to acquire a stake in the future at a predetermined formula, while a "put" option gives the seller or minority participant the right to exit the project on agreed terms. To ensure that the exercise of the option does not depend on the will of the obliged party, executed transfer documents are often deposited in advance with a notary or an escrow agent (an independent third party that takes custody of property, funds or documents under an escrow agreement, guaranteeing their safekeeping and delivery to the recipient only upon fulfilment of the transaction conditions). For participatory interests in limited liability companies, mandatory notarisation must be taken into account.
Options are currently particularly appropriate in two typical market situations — in phased business succession during a generational transition of owners, and in attracting an investor into the capital where the founder retains a stake and pre-agrees the terms of a future buyout. In one project, an investor acquired 70% of an agri-company, leaving the founder with 30%, and agreed a "call" option on the remaining stake after three years at a formula linked to EBITDA. This allowed the key manager's continued involvement and aligned the parties' interests, since the price of the future buyout depended directly on the results achieved. Option structures also underpin deadlock resolution mechanisms in joint ventures, as well as tag-along and drag-along rights.
Conditional performance of obligations links the moment of contract signing to the moment of its performance. The law expressly permits making performance conditional on circumstances, the occurrence of which may depend on the will of the parties, thereby enabling the construction of a delayed closing. Between signing and closing, the parties typically need to satisfy conditions precedent: obtaining the consent of the antimonopoly authority and the Government Commission, securing the consent of third parties (particularly lender banks or landowners under lease agreements), completing the re-registration of land plots, and confirming the absence of a material adverse change in the business. During this period, the seller typically undertakes to conduct business in the ordinary course and not to take any material actions without the buyer's consent, so that at closing the buyer receives the company in the same condition as it was at the time of signing. Until the conditions precedent are satisfied, the obligations to transfer the asset and pay the price are not subject to performance; their occurrence triggers the closing, and if the conditions are not satisfied by the agreed long-stop date, the parties may terminate the contract.
A shareholders' agreement (or corporate agreement) is necessary where the deal does not end with a change of ownership but creates a partnership — for example, when establishing a joint venture between an investor and an operating partner, or when the founder retains a stake after a strategic buyer's entry. It sets out the rules for joint governance: a list of matters requiring unanimity or qualified majority (reserved matters), the composition of the board of directors and appointment of management, dividend policy, restrictions on the transfer of stakes, tag-along and drag-along rights, and deadlock resolution mechanisms. The law provides the shareholders' agreement with protective measures: in addition to damages and penalties, a transaction or corporate resolution made in breach of the agreement may, under certain conditions, be declared invalid — while preserving the protection of bona fide third parties. For agricultural holdings, whose results depend on the coordinated work of investor and management, the thoroughness of the shareholders' agreement is often no less important than the deal price itself.
All of the above constructs are fully applicable under Russian law. The parties are left to determine the dispute resolution forum: state courts or arbitration (arbitral tribunals). Corporate disputes under agreements concerning Russian companies are increasingly being submitted to Russian arbitral institutions authorised to administer such categories of cases (for example, the Arbitration Centre at the Russian Union of Industrialists and Entrepreneurs, the Russian Arbitration Centre, the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, and others).
Deal Price and Security of Obligations
The main obstacle to transactions in the current market remains the valuation gap between seller and buyer. In these circumstances, the traditional and still extremely popular mechanism of a fixed price may not work. Corporate law instruments do not eliminate this gap but can smooth it out by finely allocating financial risks between the parties in connection with the contemplated transaction.
In such cases, two basic approaches to payment mechanics are often used: the "locked box" model, where the price is determined as of a previous reference date and may subsequently be adjusted for "leakages" (factors reducing the company's value), and the "completion accounts" model, where the final amount is adjusted post-closing.
In conditions of divergent expectations, the earn-out mechanism is particularly useful, where part of the price is paid only upon the company achieving agreed operational or financial targets in subsequent seasons. For agribusiness, where value is highly dependent on harvests, livestock numbers and market conditions, this is a natural way to bridge positions — the seller, confident in future results, has the chance to receive the full price, while the buyer does not overpay for unproven expectations. For example, in a dairy asset transaction, a quarter of the price was structured as an earn-out, conditional on achieving target milk yields and livestock numbers over two seasons.
Related to this is the model common in a cooled market, where the business is effectively acquired for a nominal sum with the assumption of the seller's debt — the real "price" becomes the volume of required investments and assumed liabilities. Such structures require particularly careful legal drafting of the allocation of responsibility for existing obligations and are typically accompanied by an extensive set of representations and indemnities.
To ensure that the buyer's claims based on representations and indemnities have practical value, they are supported by security. The most reliable instrument is an escrow account or escrow agreement, under which part of the price is reserved with an independent agent and released to the seller after the "warranty" period or in the absence of claims. A similar result can be achieved through a holdback of part of the purchase price, a security payment, an independent bank guarantee, or liquidated damages. The seller's interests are protected by a disclosure letter, excluding liability for pre-disclosed matters, and by limitations of liability — a cap on total claims, a materiality threshold for individual claims, a minimum aggregate claim amount, and a time period within which claims must be brought.
The choice of the final payment model and price adjustment criteria is a key and complex issue, influenced by the financial assessment of the acquired business, its stability, sector-specific features and other factors. The choice and implementation of legal mechanisms are a consequence of the economic model and the business interests of the parties to the transaction.
Government Approvals
Even a carefully drafted contractual structure will not achieve its purpose if permitting requirements are not taken into account. For large agricultural holdings actively consolidating the market, the prior consent of the Federal Antimonopoly Service is generally relevant. It is required where the thresholds established by the Competition Protection Law for the total asset value or group turnover are exceeded.
The regime of control over transactions involving persons from unfriendly states also remains relevant — primarily with respect to the remaining assets historically held by foreign owners. The alienation of shares and participatory interests in Russian companies by such persons is permitted only with the authorisation of the Government Commission for the Control of Foreign Investment and is subject to a number of conditions: sale of the asset at a discount of at least 60% of the market valuation, a voluntary contribution to the federal budget of at least 35% of the value (payable according to an established schedule), and, for assets exceeding RUB 50 billion, separate presidential approval. Importantly, this regime extends beyond direct sales. Consent is also required for the conclusion of options and shareholders' agreements if they result in a change of control over the company. Thus, the contractual instruments discussed above themselves become subject to regulatory approval. To this are added approvals under the Law on the Procedure for Foreign Investment in Business Entities of Strategic Importance for National Defence and State Security in respect of strategic assets, as well as re-registration of land rights and verification of compliance with permitted land use.
In practice, the list of required approvals should be compiled not on the eve of signing but already at the memorandum of understanding stage. The timelines for obtaining approvals are included in the conditions precedent and the long-stop date, upon the arrival of which the parties are entitled to withdraw from the deal if the required approvals have not been obtained.
Practical Recommendations
The current conditions do not preclude deals but raise the bar for their preparation. Based on the foregoing, several practical recommendations can be formulated, both general and specific to sellers and buyers.
An owner considering a sale or attracting an investor should prepare the business well in advance. This means putting in order the documentation for key assets, primarily land and permits — a transparent and completed, rather than hastily conducted pre-deal intra-group restructuring — as well as a realistic valuation based on current financial metrics, not solely on invested capital. Sell-side due diligence is a useful tool for pre-investment or pre-sale self-assessment, allowing the identification of risk factors and preparation for further steps. If the owner is confident in future growth, it is wiser not to insist on an inflated fixed price but to offer the buyer an earn-out mechanism, enabling the full price to be realised as results are confirmed. If capital is lacking, an alternative to a sale may be attracting an investor through an increase in authorised capital with the replacement of expensive debt.
The buyer, for its part, should take a conservative approach to valuation. Thorough due diligence is particularly justified in a market where many assets are low-margin or burdened with hidden problems. Identified risks should not be ignored for the sake of closing the deal but should be addressed through contractual instruments — representations, indemnities, price holdbacks or escrow. Valuation differences are better bridged not by a simple concession on price but by linking it to future results. When purchasing a distressed asset, consideration should be given to acquiring assets rather than shares, so as not to inherit the seller's liabilities.
The Tax Factor is Increasingly Influencing the Deal Structure
Since 2025, the corporate profit tax rate has been increased to 25%, and a number of previous tax incentives have been abolished. As a result, sellers preparing a business for sale are increasingly conducting preliminary intra-group restructuring — consolidating assets, rationalising ownership structures and optimising the tax consequences of the future transaction. Such preparation should prudently begin well in advance: restructuring conducted hastily immediately before the deal itself becomes a source of risks that then have to be addressed through contractual instruments.
Both parties would do well to bear in mind several general rules. The deal structure should be chosen based on the tax and regulatory profile of the particular asset. A map of required approvals — antimonopoly, sector-specific, and, where a foreign element is present, Government Commission approvals — should be compiled at the earliest possible stage and built into the conditions precedent and the long-stop date of the contract. Finally, the lawyer advising on the transaction should be engaged not after the price has been agreed but while the parties are still defining the parameters of future cooperation: it is at this stage that the structure, risk allocation and feasibility of timelines are established.
If monetary policy easing brings deferred demand back to the market, those owners and managers who have prepared in advance — putting assets and documentation in order and choosing a deal structure aligned with their objectives and tax consequences — will find themselves in a more advantageous position. Skilled use of corporate law instruments does not replace the commercial logic of the deal but largely determines whether the deal can be concluded on acceptable terms.