M&A activity is poised to gain momentum in the second half of this year according to a new report from Aequo and Mergermarket.

Catching the rebound: M&A in Ukraine provides valuable insights into key trends in Ukrainian M&A in the face of Covid-19, whilst looking forward to how Ukraine’s economic landscape looks set to develop in 2021 and beyond.

Total disclosed Ukrainian M&A deal value in 2020 dropped to just €171m, the lowest annual total since 2015. Meanwhile, deal volume proved more robust as investors continued to back smaller deals. Ukraine bore witness to 54 transactions across 2020, higher than that recorded in any year between 2014 and 2017, albeit still a drop from the 87 deals logged in 2019.

“M&A activity in Ukraine has been in line with the world’s trends and followed the pandemic curve as other countries,” says Anna Babych, partner and head of M&A at Aequo. “During the lockdown in early spring, we witnessed clients becoming extremely cautious. However, from June onwards, activity started to restore.”

A fall in foreign investment played an important part in Ukraine’s dealmaking downturn. In 2019, nearly nine out of every ten M&A dollars invested into Ukraine came from overseas entities, this declined sharply in 2020 with inbound deals accounting for just 31% of overall deal volume and 52% of disclosed deal value.

“In terms of the split in M&A deals between domestic and foreign players, in most cases local companies were more active last year,” says Denis Lysenko, managing partner at Aequo. “We have seen that some of the foreign strategic players were looking to exit in order to focus on their home markets.”

Following a sharp Covid-related contraction of 4.2%, the Ukrainian economy is expected to return to growth in 2021, projected to expand by 4%. This rebound, while reliant on many factors, could see M&A activity in the country reach new heights going into 2022.

Further key findings from the report include:

• Ukraine’s largest domestic deal of 2020 saw the acquisition of Dnipro Hotel by Smartland from the state for a total value of €36m. This sale was indicative of a significant trend currently taking place in Ukraine: the planned privatisation of a large number of state-owned assets.
• Private equity deal activity was not immune to the impacts of the pandemic. There were only six PE deals in 2020, four lower than in 2019. However, by value terms, these deals were valued at a combined €13m, representing an annual rise of 22%.
• The TMT sector dominated Ukrainian deal activity in 2019-2020, accounting for 21% of volume and 58% of value. This trend looks set to continue as the Covid-19 pandemic has amplified the importance of the technology industry to the global economy—a good sign for Ukraine and its prominent IT sector.

View the full report