Author: Aliona Yevtushenko, lawyer at F&P
Despite the war, rising inflation, and macroeconomic uncertainty, Ukrainian companies demonstrate resilience and adapt to challenging realities. Investors are focusing on promising sectors, and companies that know how to effectively use M&A tools gain competitive advantages. How does instability affect this market, and what strategies can ensure successful deals?
Ukrainian M&A Trends
The global M&A market has undergone significant changes due to rising inflation, increasing interest rates, and economic uncertainty. In 2023, , global M&A activity sharply declined, reaching one of the lowest levels in the past 10 years in terms of deal value. However, it can be said that despite the war, the M&A market is showing resilience. The volume of announced and completed M&A deals in 2024 amounted to $1.2 billion.
Interestingly, the total value of the top ten deals was $743 million.Key sectors attracting investors were IT, agriculture, energy, and privatization. It is especially worth noting the activity of Ukrainian companies, which not only attracted foreign investments but also made acquisitions abroad.
In 2025, the trend of M&A market growth is expected to continue. So despite the challenges, M&A in Ukraine will operate this year.
Will the M&A Market Fully Recover?
Obviously, prospects depend primarily on achieving peace. This could contribute to the restoration of investor confidence, macroeconomic stabilization, improved economic conditions, increased external funding, and the recovery of critical infrastructure. However, to fully capitalize on these opportunities, Ukrainian companies must continue to improve their investment readiness and adapt to international standards.
One can predict the rise in the cost of Ukrainian assets after the end of the war due to reduced risks, potential capital inflows, and the restoration of business activity. The most attractive sectors for investors will be traditional ones for our market—IT and agriculture—as well as the defense-industrial complex. Investments may also flow into post-war recovery sectors, such as energy and infrastructure. However, realizing this potential depends on the depth and duration of stabilization, government reforms to improve the investment climate, and global economic conditions.
Among the factors that will influence the ability to attract investment:
- Stable external funding. It currently covers 40% of Ukraine’s budget and is critical for the survival of the economy (and the country as a whole).
- Economic conditions: availability of sufficient labor, the risk of further devaluation of the national currency.
- The state of the energy system, which depends on the ability to protect key assets from Russian attacks and the resources available to businesses to implement alternative generation methods.
- The work of Ukraine’s defense industry. It accounts for 26.3% of the projected GDP. Ukraine has significant potential in this area, so it makes sense to search for and attract foreign partners.
- Insurance of war risks. This includes, in particular, FortuneGuard programs covering $50 million per asset and URGF with coverage of $11 million.
What’s Slowing Down M&A Deals in Ukraine?
We cannot forget the challenges: 80% of companies in Ukraine lack investment projects developed according to international standards. This significantly narrows opportunities for attracting capital.
In other words, companies are not ready for investment due to insufficient understanding of M&A processes, risks, and legal aspects of such deals. Focusing on internal operations without considering opportunities for mergers and acquisitions limits the prospects for scaling and entering new markets.
To avoid losing competitive advantages and being left out of global economic processes, businesses need to change their approach. By seeking expert assistance, companies will be able to prepare effectively for capital raising and take advantage of M&A opportunities for growth and resilience in difficult conditions.
However, successful M&A deals require not only a deep understanding of market trends but also proper legal and financial support. Due diligence becomes of particular importance. It helps identify risks associated with deals and ensures their compliance with international standards.
What Happens to Due Diligence in High-Risk Conditions?
In Ukraine, due diligence includes checking asset ownership, judicial risks, sanction restrictions, and compliance with legislation. However, on May 24, 2024, the European Union Council officially adopted the Corporate Sustainability Due Diligence Directive. It requires large companies operating in the EU to be accountable for the impact of their activities on human rights and the environment.
The directive is aimed at making large businesses take responsibility for the transition to a green economy and social justice. Companies with over 1000 employees and revenues exceeding €450 million will have to implement a risk assessment system to identify and eliminate negative impacts on human rights and the environment. Sanctions and the obligation to compensate for harm will be imposed in case of violations.
Ukrainian companies with trade relations with the EU must consider the requirements of this directive. It applies not only to the activities of companies but also to their subsidiaries and business partners throughout the entire supply chain.
It is worth noting that in unstable times, conducting thorough due diligence becomes critically important. To minimize risks in international M&A deals in Ukraine, the following are necessary:
- Assessment of potential restrictions and development of strategies to circumvent them.
- Use of insurance tools to protect the interests of the parties.
- Compliance with the antitrust legislation of Ukraine and other jurisdictions.
Despite instability, the M&A market in Ukraine continues to function and opens up new opportunities for business. Companies that can quickly adapt to new realities, consider international requirements, and ensure proper deal preparation will gain significant advantages.
