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The M&A market in Ukraine is still suffering from a "mismatch" in expectations between foreign investors and local business owners but some deals are starting to move through the pipeline, says Zoriana Podilchuk, a director of FinPoint.
"Somewhere like six months ago we noticed a significant increase in interest to do investments in Ukraine," said Podilchuk in a podcast with Adam Mycyk, partner at global law firm Denton's. However, "there is a slight mismatch between the expectations of the buyers and the readiness of the sellers."
Podilchuk, whose firm is an associate of Rothschild & Co in Ukraine, said the recent history of the M&A market in Ukraine has been stop and go. Activity halted completely for several months after the full-scale Russian invasion of February 2022 then, a few months later, interest in M&A grew along with optimism of an early end to the war. Then, as it became clear that the war wouldn't end so soon, activity stopped again.
According to data gathered by KPMG, 47 deals were announced in 2023 in the Ukrainian M&A, almost 70% more than in 2022. At the same time, the value of the average M&A deal rose to $44.6 million in 2023 from $26 million in 2022.
The latest increase in M&A interest, FinPoint's Podilchuk said, comes as some businesses in Ukraine find themselves performing very well despite the war.
"They have good profits. They are growing revenue, growing volumes. They expand into Europe. They are growing exports," she said. "The founders value their companies highly so they are not ready to sell at two or three of ev/ebitda multiple because they see the potential and they still hope that this war will end soon and they will be able to grow even faster.
"But then the buyers who are willing to put money now in Ukraine are not willing to risk a lot of money," she said.
Podilchuk suggests foreign investors may have more success with local businesses if they have something else to offer besides cash.
"Sometimes when the buyer can offer something very interesting to the seller, meaning partnership, some kind of operational optimization, some kind of efficiencies, then the seller signs," she added.
