Ukraine’s investment landscape is evolving amid ongoing challenges, with certain sectors showing stronger potential for growth. M&A activity continues, but deal-making is influenced by security risks, regulatory constraints, and financial considerations. Oleg Kovtun, managing partner at FinPoint, and Dmytro Zozulia, Head of M&A at MHP, shared their insights on these issues in a blitz interview for KPMG M&A Radar 2024.
What sectors of the Ukrainian economy do you think are the most promising for investment in the current environment? Have these priorities changed in 2024?
Oleg Kovtun, managing partner at FinPoint:
— Here at FinPoint, we can speak to our areas of expertise as being particularly favourable for investment right now. As mentioned, we have seen success in transactions expanding positions in the fields of pharmaceuticals, agro-processing, and IT. We can also add to these high-tech industries like biotechnology and Ukraine’s rapidly developing defence industry, all of which have significant international potential.
Export-oriented industrial production naturally lends itself to greater international involvement, as well as acquisitions to streamline multimodal logistics and deliver these industrial products to international markets, such as the EU and beyond.
Finally, raw and processed materials for construction and reconstruction are an obvious sector with investment potential as a more stable Ukraine increases its focus on rebuilding and recovery.
Dmytro Zozulia, Head of M&A at MHP:
— Agri-food: frozen food, bakery products, almost the entire value chain, dairy, etc. Defence tech is developing rapidly too, and interest will only grow. Agricultural land is also a stable, low-risk asset.
What are the key prerequisites for successfully closing M&A deals in the current environment?
Oleg Kovtun, managing partner at FinPoint:
— As mentioned earlier, the prerequisites to successfully closing deals are currently shaped by the dynamics and expectations regarding security, which clearly involves concerns about war-related risks.
As such, investors’ ability to secure deal financing may suffer as a consequence. Nonetheless, this capacity to produce adequate funding for the deal, whether immediately or through staged transactions, remains one of the most important prerequisites.
Dmytro Zozulia, Head of M&A at MHP:
— The first is a shared vision of the future. If the partners understand each other's motives and goals well and the deal design meets the interests of both parties, this is the key to success. There should be no imbalance, as that ruins deals. The second prerequisite is project management. A successful deal means clear planning, constant monitoring, and flexible adjustments, because something always needs fixing before a deal goes ahead.
In your opinion, what are the top-three factors that need to be changed or strengthened to improve the investment climate in Ukraine and attract more foreign investors to Ukraine?
Oleg Kovtun, managing partner at FinPoint:
— The top-three factors that are holding back improvements to foreign investment in Ukraine are clear, though tackling all three will require differing approaches.
- Security is an obvious issue, and the market will require greater levels of certainty if it is to experience a boost in investor confidence.
- Currency regulation is currently another obstacle, though relaxations of restrictions on repatriating and reinvesting funds, as well as on foreign currency exchange, have shown promise and further liberalisation is anticipated in 2025.
- Excessive regulation, as well as legal risks and perceived risks of nationalisation, are the third factor affecting investor confidence, and will require an overall reduction of state intervention in specific sectors in order to encourage the private sector to step in.
Dmytro Zozulia, Head of M&A at MHP:
— The first is clear and equal rules of the game for everyone. If one company pays taxes while another has the option to not do so, competition becomes unequal. The second relates to the traditional challenges facing any business, such as the judicial system and corruption, though I personally do not face such issues.
