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Overview of M&A activity

Ukraine has experienced adverse economic and geopolitical conditions since 2014 that have had a negative effect on overall M&A activity in the country. Following economic and political stabilisation, deal activity in Ukraine significantly picked up in 2019. After the covid-19 pandemic struck the country, M&A activity experienced an overall slowdown that affected practically all industries. According to the KPMG M&A Radar Ukraine report, Ukrainian M&A activity dropped in 2020, with 69 transactions worth a combined US$945 million, a 60 per cent decrease over the previous year.

Naturally, inbound M&A activity also decreased, from US$846 million in 2019 to approximately US$534 million in 2020. Major domestic Ukrainian players continued to generate a significant part of M&A activity in Ukraine yet significantly decreased their outbound M&A activities.

The most active sectors for M&A activities in 2020 were real estate and construction, agricultural, and innovation and technology.

The real estate sector M&A activity also experienced an approximately 50 per cent drop in deal value from US$392.2 million in 2019 to US$199.6 in 2020. In Ukraine's agricultural sector, which has been historically the most resilient to crisis, we observed a slight increase in M&A volume, as the volume of transaction value has increased from US$162.3 million in 2019 to US$190 million in 2020, which mainly involved land banks. Ukraine being world-renowned for its IT outsourcing industry slowly gains its momentum in the IT products industry. IT M&A activity in 2020 experienced a slight decrease in deal value from US$369.5 million in 2019 to US$156 million in 2020. In the energy sector, foreign investors have shown increased interest in investing in Ukraine's oil and gas sector through participation in tenders for concluding production-sharing agreements.

In 2016, the government announced the privatisation of several large state enterprises, including Ukraine's largest producer of nitrogen fertiliser, the state-owned Odessa Portside Plant. Unfortunately, the attempts to auction off the Plant failed to attract any bids from strategic investors. In 2018, the government relaunched the privatisation of large state enterprises. The list of companies included United Mining and Chemical Company, Kransnolimanskaya Coal Mine, Electrovazhmash Plant and President Hotel, to name a few. These companies remain at the different stages of preparation for privatisation. In 2020, the Ukrainian Parliament voted to postpone the announcement of the first auctions for large enterprises because of the impact of the covid-19 pandemic on volatility of the world's markets and valuation of businesses. Nevertheless, the privatisation of large enterprises was relaunched in March 2021, and the first auctions for large enterprises should be held at the end of 2021.