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M&A in Ukraine: Rising to the challenge

Law company Aequo and Mergermarket publish a new report on the M&A market in Ukraine "Rising to the challenge: M&A in Ukraine"

Ukraine's M&A market saw an uptick in 2016, with deal volume rising by 35% year on year, according to a new report by Aequo and Mergermarket. Disclosed deal value also rose 131% to €310m, although this figure was boosted by UniCredit's sale of Ukrsotsbank to ABH Holdings for €281m.

The upturn in Ukraine's M&A market in 2016 was indicative of the country's slowly recovering economic growth. Denis Lysenko, a managing partner at Aequo, comments: "Looking at the macroeconomic situation, and GDP numbers in particular, we can say that Ukraine effectively has passed the bottom of the downturn. We expect that 2017 will be another year of moderate growth in the economy overall, which will probably translate into more deals."

Other than recovering growth, a number of other factors may help catalyse dealmaking in 2017. For example, the IMF is backing the restructuring of state-owned enterprises, including several electricity distribution companies. "There are around 400 state enterprises up for privatisation, including around 20 major companies," says Anna Babych, a partner at Aequo. "These are the big ones where Ukraine expects to attract international investors, including PE houses."

Despite growing optimism about the outlook for Ukraine, there are still downside risks. The uncertain geopolitical environment makes it more difficult for the government to push much-needed reforms that would stand Ukraine in good stead over the longer-term, including overhauling the judiciary, the tax system, and the cutting of subsidies.

Further key findings from the report include:

  • The financial services sector accounted for 43% of deal volume over the past two years. Outside financial services, lively sectors included agriculture, energy, and TMT, particularly information and communications technologies (ICT) outsourcing.
  • Private equity (PE) activity in Ukraine has been subdued over the past three years. And activity was fairly static in 2016, with just four deals, all with undisclosed values.
  • Looking ahead, the Mergermarket Heat Chart, which logs 'companies for sale stories' for the past six months, shows that the consumer sector is generating the highest number of M&A targets (10), followed by financial services and industrial & chemicals with seven each.

>> To view the full report Aequo / Mergermarket "RISING TO THE CHALLENGE: M&A IN UKRAINE" please click here

>> To view the Database of M&A transactions in Ukraine 2016 / InVenture Investment Group please click here

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