Like the rest of the world, the Ukrainian M&A market was dramatically hit by the coronavirus (COVID-19) pandemic. Indeed, the number of M&A deals decreased in 2020, for the first time since 2014. However, the fourth quarter of 2020 saw a positive surge in the number of M&A deals, and although most of those deals started before the pandemic, the fact that they still happened sent a clear signal: investors are ready to buy in the new reality.
The leading areas for investment remain the same, and include agriculture, real estate and construction, infrastructure and logistics, IT and telecommunications, retail, and mineral resources.
There were fewer M&A deals in the renewables field last year than in 2019. Evidently, the decrease of the previously lucrative feed-in tariff and the unstable situation with the Guaranteed Buyer prevented investors from new acquisitions in this area. Nevertheless, interest in green energy projects is likely to grow due to the increase of the carbon tax in Europe.
Some industries were impacted by the pandemic more than others, of course, including travel and recreation, entertainment, automotive, and aviation and aircraft production, all of which saw a dramatic decrease in M&A transactions. Even here, however, some did better than others; in both the retail and recreation sectors, for instance, we saw several important transactions, including most significantly, Rewe International’s sale of its Billa supermarket chain to Novus, and the sale of downtown Kyiv’s Dnipro Hotel in the course of the privatization process.
At the same time, the pandemic boosted the development of certain areas, like pharmaceuticals, online technologies, food delivery, online shopping, and cloud services. This explains the increasing interest by investors in these areas, which may result in a number of deals this year.
Moreover, there are several positive developments likely to boost M&A activity in Ukraine in coming months. First, this year the Ukrainian high delegation signed various memoranda with the United Arab Emirates expected to attract USD 3 billion of investments into Ukraine.
Also, in May 2021, during the visit to Ukraine by Bruno Le Maire, the Minister of the Economy and Finance of the French Republic, the Government of Ukraine and the Government of the French Republic signed four framework agreements aimed at implementing projects worth a total amount of EUR 1.3 billion.
Finally, in March 2021, the Parliament of Ukraine adopted a law unblocking the large-scale privatization process that had been put on hold during the quarantine. According to numerous reports, the State Property Fund of Ukraine expects to receive around EUR 350 million in 2021 from this process. If so, M&A lawyers can expect it to result in a considerable amount of work.
Similar to the privatization process, Ukraine is actively promoting several PPP or concession-based infrastructure projects, and there were successful concession projects in Ukraine’s Kherson and Olvia seaports in 2020. In both cases the tenders were prepared and run under the auspices of the EBRD and the IFC. In addition, in the first months of this year, both IFIs agreed to fund the development of a feasibility study and tender documentation for the concession of the Chornomorsk port.
Another opportunity opened last year for investors in mineral resources: the presentation of the so-called Investment Atlas of Deposits, a database of the State Service of Geology and Subsoil of Ukraine that contains detailed information about available deposits.
All these opportunities keep lawyers in Ukraine positive about the perspectives of the local M&A market. We also expect that the ongoing vaccination will allow more investors to come to Ukraine to explore opportunities for new projects and deals.
By Illya Tkachuk, Partner and Head of Corporate M&A, Integrites