While Russia’s full-scale invasion caused a major decline in M&A activity in 2022, Ukraine’s economy has proven remarkably tenacious. If 2022 was a year when businesses taking a reactive stance to overcome the devastation of war, 2023 has seen companies proactively improving their economic resilience. Some industries, such as the Ukrainian IT sector, were better placed to adapt to these changes due to having a developer base in Ukraine and headquarters in Europe and the USA. Other sectors, such as Agriculture, have made prudent investments in storage and transportation infrastructure, making lasting improvements whose effect will be felt for years to come.
"Despite setbacks in 2022 and 2023, business, and the Ukrainian state and society as a whole have pulled together. This collective effort affirms Ukraine’s commitment to business continuity and the determination of its citizens to overcome this difficult period. Ukraine has withstood multiple crises caused by unjustified Russian aggression, demonstrating the will and enthusiasm to improve and strengthen production, ensure timely exports, and create new investment opportunities. In searching for solutions in the face of overwhelming odds, Ukraine has laid and continues to lay the foundation for improving investor confidence in 2024," says Svitlana Shcherbatyuk, Director, Head of Transaction services, Deal advisory, KPMG in Ukraine.
Following territorial losses, population outflows, and a 30% drop in GDP in 2022, 2023 saw Ukraine’s business environment begin to normalise, even rallying in some cases. With the announcement of 47 deals in 2023, the Ukrainian M&A market was on the rebound with the volume of activity increasing by almost 70% compared to 2022. Ukrainian M&A deals doubled in overall value between 2022 and 2023, exceeding levels last seen in 2020. With only 60% of deals disclosing financial details, the true value for 2023 would be even higher.
Average M&A transaction values also increased from a war-induced slump. In 2022, the average M&A deal value was $26 million, the lowest seen since the Revolution of Dignity in 2014. By the end of 2023, this indicator had increased to a more robust $44.6 million (principally as the result of a $500-million deal involving NJJ Capital’s acquisition of telecommunications company Lifecell).
There were relatively few deals worth more than $100 million in 2023, with only three such deals announced. However, investor confidence in Ukraine is growing as more risk mitigation options are made available through the Government of Ukraine, international partners like the US, EU and the UK, and international finance institutions such as the World Bank’s Multilateral Investment Guarantee Agency (MIGA). This confidence boost means that Ukraine is regaining its attractiveness as a location for larger-scale deals on the scale of, for example, the aforementioned Lifecell deal.
“In the aftermath of the Russian full-scale invasion, the M&A landscape in Ukraine has had to undergo substantial transformations that can make deal-making more challenging for both sellers and buyers. However, Ukrainian dealmakers have proven their adaptability and resilience in navigating these complexities. Despite heightened challenges, the outlook remains cautiously optimistic as Ukraine looks ahead to potential opportunities in 2024,” says Volodymyr Maksymenko, Associate Director, Transaction Services, KPMG in Ukraine