By the mid-2000s, a visible circle of players had already formed in Ukraine’s agricultural market. Some companies were growing faster, while others were gradually losing ground. At that point, those with greater resources and a long-term view of agribusiness began actively acquiring assets. That was when Ukraine’s agricultural sector entered a phase of major deals that later became decisive in shaping the industry.
Which deals in Ukraine’s agricultural sector can be described as having defined the market’s architecture over the years of independence, and why exactly these deals?
In the long run, Ukraine’s agricultural market has gone through the classic development cycle typical of any industry. First, a large number of players enter the market, making it fragmented and unconsolidated. Over time, natural consolidation begins, as some investors exit while those who remain gradually scale up.
In Ukraine’s agricultural sector, this process has been underway for more than ten years. One of the clearest examples is Kernel’s strategy, as the company acted as a consolidator both in crop production and processing. It first acquired Allseeds Group and later, in stages, the assets of Kreativ, including oil extraction plants. As a result, Kernel effectively built a dominant position in the edible oil production segment.
Another illustrative example is Bunge’s acquisition of the Vinnytsia oil extraction plant. This also fits the same logic of gradual expansion and concentration of assets in the hands of large players.
In crop production, one important deal was the entry of Saudi Agricultural and Livestock Investment Company through the acquisition of the Mriya agricultural holding. This was a landmark event because it brought a strategic foreign investor to the Ukrainian market, one that sees Ukraine as a long-term destination for the development of agricultural production.
The market structure was also influenced by deals carried out by large Ukrainian groups. For example, Epicentr actively built up its land bank through the acquisition of agricultural companies, including Svarog and other assets. As a result, the company quickly became one of the largest players in crop production.
All of these deals effectively shaped the current architecture of the market, where several large agricultural groups with sizable land banks and vertically integrated business models can be identified.
Which segments of the agricultural sector were the main centers of consolidation at different stages: crop production, processing, infrastructure, or trading?
Consolidation in the agricultural sector occurred in waves. One of the first segments to consolidate actively was processing, in particular sunflower oil production. It was here that large companies began buying oil extraction plants and building large-scale production chains. Kernel is a good example, as through a series of deals it became the undisputed leader in this segment.
At the same time, consolidation was taking place in crop production. Here, the key driver was the expansion of land banks. Companies with access to capital gradually bought out or absorbed smaller players, building agricultural holdings with hundreds of thousands of hectares.
A separate area was agricultural infrastructure, primarily port and grain terminals. Over the years, international traders and infrastructure investors entered this segment. For example, Posco Daewoo acquired a grain port terminal in Mykolaiv, Glencore acquired an oil port terminal in Mykolaiv, Louis Dreyfus invested in a grain transshipment terminal in Odesa jointly with Ukrainian partners (Brooklyn-Kyiv), and China’s COFCO Agri also invested in port infrastructure.
Another landmark project was the Neptune grain terminal, built by Cargill together with the Ukrainian TIS group. It is one of the largest port infrastructure projects in grain logistics.
Thus, consolidation took place not only in production, but also in adjacent segments, primarily processing and logistics, which are critical for the export of Ukrainian agricultural products.
Why did Ukraine’s agricultural sector prove so well suited to consolidation compared with other industries?
The agricultural sector has one key feature: it scales well. If a company cultivates, say, 20,000 hectares, it can buy another 20,000 and integrate that land into its operating model quite efficiently. Managing scale works rather naturally in this business.
In many other industries, this is far less obvious. For example, in product IT, acquiring another company does not always create real synergy. If one company makes one product and another makes something completely different, combining them may have little practical value. In agriculture, the situation is different because additional assets directly increase the scale of production.
The second important factor is access to capital, which agricultural companies had during certain phases of the market’s development. This allowed major players to invest actively in business expansion and acquire new assets.
The third factor is the global competitiveness of Ukrainian agricultural production. Crop farming in Ukraine is competitive on a global scale. This means that even during difficult periods, companies can continue operating in international markets, which makes the sector attractive to investors.
It was precisely the combination of business scalability, access to financing, and competitiveness in global markets that made the agricultural sector one of the most active areas for mergers and acquisitions in the Ukrainian economy.
In agriculture, what is most often the real motive for an acquisition: scaling up, control over raw materials, processing, logistics, or access to margins?
The motives behind the acquisition of agricultural assets evolved together with the market itself. Around fifteen years ago, many investors entered the agricultural sector with rather simple logic, but today that logic has become much more pragmatic.
In the mid-2000s, interest in agribusiness was often investment-driven. Some players entered the market expecting that they could quickly assemble a land bank, develop the company, and sell it a few years later at a higher price. There were many such investors, and many of them viewed the agricultural sector as a temporary opportunity to make money.
Today, the logic behind asset acquisitions looks different. For new players, agribusiness often becomes part of a broader economic model. For example, for companies operating in processing, the key motive becomes control over raw materials. This logic can be seen in the case of OKKO. The company already had experience with agricultural products through trading and commodity settlements, and later decided to develop ethanol production, which requires a stable supply base.
In such a situation, crop production itself becomes part of a vertically integrated business. Therefore, today the motive for acquiring agricultural assets is more often linked to control over raw materials, the development of processing, or the expansion of production scale.
How has the buyer profile changed over the past 15 years: who entered the sector before, and who is coming in now?
Fifteen years ago, there were many financial investors, as well as industry players that were acquiring smaller companies.
Today, the main buyers are industry players already operating in the sector or in adjacent industries. For them, the acquisition of new assets is a logical continuation of their growth strategy.
Another category of buyers consists of foreign strategic investors. There are not many of them, but their deals are highly significant for the market. One example is the entry of Saudi Agricultural and Livestock Investment Company, which acquired the Mriya agricultural holding. Such investors view Ukraine’s agricultural sector as a long-term production development opportunity.
Why do owners sell agricultural assets, and why, despite the war, has there not been a mass wave of sellers on the market?
The reasons for selling agricultural assets are usually quite pragmatic. Most often, owners sell the business when they realize that significant investment is required for further development, and they are not prepared to commit additional capital or change the scale of the business.
Agribusiness is becoming increasingly complex. To keep developing, a company often needs to invest in new machinery, logistics, infrastructure, or processing. Not every owner is ready to take on such investment commitments. In such a situation, selling the business becomes a rational decision.
Another reason for selling is tied to economic cycles. During periods when sector profitability declines, some financial investors decide to exit the business. That is why, at various times, assets appeared on the market from players for whom agriculture was never a long-term strategy.
At the same time, there is no mass exodus of sellers on the market today. In most cases, a sale takes place when several factors align. Either the owner changes their business strategy, or a buyer emerges who is ready to offer a valuation that genuinely satisfies the seller.
Which assets remain the most desirable for buyers today, and why does land continue to be the main object of interest?
If we speak about the agricultural sector as a whole, the most desirable asset remains land, or more precisely, control over a land bank. The amount of fertile land is limited, which makes it a strategic resource in the long term.
Ukraine has one additional peculiarity. Full liberalization of the land market has still not been completed, so most agricultural companies operate through leases. But even control over leased land creates a serious advantage. If a company already works with certain land plots, it has a much stronger position in the event of full market liberalization.
For this reason, many investors view ownership of a land bank as a way to secure an advantageous position for the future, when market liberalization is finally completed.
Demand for land also depends on the scale of the asset. Smaller land plots can sell at fairly high prices, sometimes even close to $3,000 per hectare in western regions. Such assets are easier to acquire because the overall transaction amount is relatively small.
When it comes to large companies with land banks of tens of thousands of hectares and additional infrastructure, the pool of buyers narrows sharply. Such deals require tens of millions of dollars, and not every investor is prepared to commit such sums.
How has the approach to valuing the main asset types changed over the years: land, elevators, and infrastructure?
In the case of a land bank, the main logic remains valuation on a per-hectare basis. If we compare different periods, prices have not changed as dramatically as it sometimes seems. Broadly speaking, one can refer to a range from less than $1,000 per hectare for less attractive land to $1,500–2,000 and more for higher-quality assets. Location has a strong effect on valuation. Land in the western part of the country may cost more, while assets closer to the front line or the Russian border may be valued at a discount.
Much more noticeable changes have taken place in the approach to valuing elevator infrastructure.
How exactly, and what does that say about the state of the market for infrastructure assets?
As recently as about seven years ago, elevators were valued in a fairly simple way. The main logic was the cost per ton of storage capacity. A new elevator could be valued at roughly $200 per ton of capacity, while older Soviet-era facilities were worth less. This approach was largely derived from construction cost. Market participants looked at how much it would cost to build a new facility.
Over time, the situation began to change. A large number of new elevators were built in Ukraine, and gradually an oversupply of storage capacity emerged. This became particularly noticeable after 2022, when additional storage capacity was built. Once exports normalized, part of that capacity turned out to be excessive.
As a result, elevators appeared on the market that were effectively not generating any profit. This led to a change in the valuation approach. Instead of looking at the cost per ton of storage, the market began looking at the financial performance of the asset.
Today, the classical earnings-based valuation model is used more and more often. The value of an elevator is determined based on EBITDA/profit and by applying a multiple. For the Ukrainian market, a multiple of around five times EBITDA/profit appears to be a fairly normal benchmark.
If an elevator does not generate profit, its value may be quite low, regardless of how much it cost to build.
Has the discount on Ukrainian agricultural assets increased after 2022, and how much does war risk actually affect business valuations?
Ukraine had always traded at a certain discount. This was linked to the general perception of country risk. Starting with the 2008 financial crisis, then due to political events, changes of government, and later the war, that discount was effectively always present in business valuations.
If we compare the valuation multiples of Ukrainian companies with similar businesses abroad, the gap existed even before. After 2022, that gap did not change radically. At the same time, war risk affects the very feasibility of a deal. It is most strongly reflected in the location factor. If a business is located closer to the front line or the Russian border, this may affect not so much the valuation as the very ability to find a buyer. Investors may simply not be prepared to buy an asset in such an area. If the asset is located on the right bank of the Dnipro or farther west, interest in it is usually much higher.
Historically, what role did access to capital play in the development of M&A in the agricultural sector, and what forms of fundraising actually built this market?
In the second half of the 2000s, agricultural companies actively entered international capital markets. That was when a wave of IPOs by Ukrainian agricultural holdings took place. Among the best-known examples were Kernel, MHP, and Astarta. This gave them access to equity capital and allowed them to expand their businesses significantly, including through the acquisition of other companies.
Some companies carried out private placements of shares. Mriya, for example, took that route. Other companies also raised capital through public markets. In 2010–2011, several more agricultural companies went public, including Industrial Milk Company, Agrotone, and KSG Agro.
Once companies became public, they gained access to debt financing. They were able to place eurobonds and raise substantial amounts of capital. This allowed them to finance business expansion and acquire new assets.
Over time, the circle of companies with access to such sources of financing became rather narrow. Today, there are not many such players, and this also affects the number of deals on the market. Companies that have access to capital or generate enough of their own funds remain the main buyers of assets.
Where does the money for deals in Ukraine’s agricultural sector come from today?
After 2022, most transactions in the Ukrainian market have been financed through buyers’ own funds. Borrowed money is practically not used to finance M&A.
Bank loans have historically played a limited role in such deals. Creditors in Ukraine are rather cautious about financing business acquisitions because of the high risks. Even in previous years, this was not a widespread practice.
That is why companies buying assets today usually use money earned in their core businesses. Sometimes another factor appears in the market as well. A large amount of hryvnia liquidity is accumulating in Ukraine, but it does not always suit sellers. Many business owners are unwilling to sell companies for hryvnias, since their businesses generate foreign currency revenues. In such cases, sellers prefer to remain owners of the assets rather than receive payment in an unstable currency.
What role could foreign strategic investors play in the future of Ukraine’s agricultural market, and what is currently holding back their arrival?
Foreign strategic investors are already present in Ukraine’s agricultural market, but there are still not many of them.
Such investors look at Ukraine from the standpoint of a long-term strategy. What matters to them is not short-term market fluctuations, but access to large-scale agricultural production and export potential.
Foreign strategics may also have a different valuation logic. If, for a financial investor, it is important to understand when and with what return they will be able to sell the asset, a strategic investor often buys a business for long-term ownership. Because of that, such an investor may sometimes be willing to pay a higher price for an asset.
Which segments are likely to become the next candidates for consolidation in the coming years: crop production, oil extraction plants, infrastructure, or processing?
Most likely, the consolidation process in Ukraine’s agricultural market will continue primarily in crop production. Even though major players have already emerged in this market, there is still a considerable number of medium-sized and smaller companies that could become targets for further acquisitions.
Changes are also possible in the processing segment. In 2022–2023, oil producers earned very high profits. This attracted significant attention to the sector, and new oil extraction capacity projects began to appear. At the same time, however, the market is already raising questions about how fully these new capacities will be utilized in the future. If the economics of such projects prove more difficult than expected, this could create conditions for new deals in the segment, as loss-making projects may be put up for sale.
Interest may also remain in infrastructure assets. Port and grain terminals continue to be a key element of export logistics. For international traders and strategic investors, such facilities often become the first point of entry into the Ukrainian market.
If everything is reduced to one main idea, what type of deals or what deal logic best explains where Ukraine’s agricultural market is heading?
Today, many companies of different sizes operate in the market, but groups are gradually emerging that significantly outperform others in terms of asset size and ability to invest in development.
Such companies consistently combine several elements of the agricultural business. They operate not only in crop production, but also in processing, logistics, and exports. As a result, a resilient business model is formed in which the company controls a large share of the value chain economics.
It is precisely this model that is gradually becoming decisive for the market. In the long term, the winners will be the companies that are able to operate not with isolated assets, but with the full economics of agricultural production. This means combining scale, access to infrastructure, control over raw materials, and the ability to create added value through processing.
