‘Not waiting until the war is over’ – Foreign investment keeps growing in Ukraine

Ukraine is still far from an investor’s paradise, but increasingly valuable business deals are being signed in the war-torn country this year.  In the first nine months of 2024, there were 36 Ukrainian mergers and acquisitions (M&As) with a total estimated value of $643 million, according to a new report from KPMG Ukraine, an accounting organization based in Kyiv. The average value of M&As was $38 million.For comparison, there were 37 deals worth $625 million in the same period last year with an average value of $27 million.The start of the full-scale invasion painted a bleak scene for Ukraine’s M&As with only 28 deals amounting to $494 million in 2022, the lowest level in a decade. But Ukraine’s business activity is slowly rising from the ashes, bolstered by inflation control and gross domestic product (GDP) growth in 2023, and topped off with resilient companies.
Despite Ukraine’s struggles on the battlefield this year and Russian attacks wiping out a chunk of its energy infrastructure, foreign investment has perked up this year. There were 10 inbound deals worth an estimated $473 million in the first nine months of 2024, compared to 13 deals in 2023 bringing in $278 million.The majority of inbound deals came from North America and Europe, with three transactions totaling $255 million and five transactions accounting for $159 million, respectively. Those that are coming in are willing to take the high risks for the high reward, but are investing in companies that operate successfully and staying away from distressed assets, Dmytro Boroday, a partner at private equity firm Horizon Capital, told the Kyiv Independent.
Sectors like metal and mining, that have been hard hit by the invasion, have seen no M&A activity since the start of the full-scale invasion. Many of the assets have been targeted by Russia and are located close to frontline regions.
This year has also seen an inbound deal from beyond Ukraine’s European and American allies after the Saudi Agricultural and Livestock Investment Company (SALIC) acquired a 12.6% stake for $54 million in Ukrainian agri-tech company MHP SE, a leading exporter of vegetable oils.Like most of the foreign investors, SALIC was already present in Ukraine. While more foreign companies are showing interest in Ukraine, when it comes to the crunch, it is still rare for new investors to come in. One exception was the purchase of Ukraine’s third-largest mobile operator Lifecell and service provider Datagroup-Volia by French billionaire Xavier Niel’s company NJJ Capital, who merged the two companies under a new entity Datagroup-Volia-Lifecell. The total value of the deal was over $600 million.
The European Bank for Reconstruction and Development and the International Finance Corporation on Oct. 10 announced they would provide $435 million to finance the merged company.
“It is the largest M&A deal over the last decade,” said Boroday, adding that including all capital expenditures the deal will amount to $1.5 billion.
“We would like to see more deals of this magnitude and scale. Hopefully, this would signal to other investors in the market that the time to invest and do major deals is not waiting until the war is over but deploying (capital) now,” he added.
Ukrainian innovation and technology companies attracted the most funding from foreign investors with six deals totaling $290 million. The average value was $48 million, with IT unicorn Creatio’s $200 million funding round bringing in the most of all M&As in the first nine months of the year.
“This confirms market faith in the stability of Ukraine’s IT sector which has been able to demonstrate resilience with minimal disruptions even during wartime, owing to this sector’s potential for remote work and thus the ability to maintain operations even with a decentralized workforce,” KPMG said.
Ukrainian companies are also increasingly investing money abroad, which KPMG believes could continue in the future. Outbound activity has risen to an all-time high since the start of the Covid-19 pandemic with 10 deals totaling $55 million as Ukrainians seek to diversify and pursue opportunities internationally.
Outbound M&As extend yonder the EU’s borders, with Ukrainian IT firm Intellias acquiring UK-based IT consultancy NorthLink Digital in August and U.S.-based digital health company C2 Solutions in April.
Ukraine’s private energy giant DTEK, owned by the country’s richest man Rinat Akhmetov, conducted the largest disclosed outbound deal valued at $32.4 million with Polish renewable energy company Columbus Energy.
The company, which has suffered heavily from Russia’s attacks on energy infrastructure, announced it had acquired a 133-megawatt battery storage project in March after an agreement with Columbus. It’s DTEK’s breakthrough deal into the Polish renewables market as the company looks towards a green future in line with the EU.  
At home, domestic deals made up 44% of the overall volume of M&As but only contributed 18% of the deal volume. KPMG believes this could be down to the lack of transparency of domestic transactions, with only 25% of deal values disclosed. A clearer picture is expected at the end of the year. The largest disclosed sale was the privatization of Kyiv’s Hotel Ukraina, which was sold to Ola Fine LLC owned by e-sports tycoon and Stalker game series owner Maxim Krippa for $59.5 million.Since the full war, Ukraine has amped up its privatization efforts to raise money for the state budget, with Krippa’s purchase the largest privatization case during the first nine months of the year.
This was surpassed in October by the sale of the state-owned UMCC-Titanium, one of the world’s largest titanium producers, to Cemin Ukraine for $96 million.
Agriculture has also seen significant attention from private Ukrainian companies. The biggest deal saw MHP SE acquire a 100% stake in Ukrainian Meat Farm LLC for $15.1 million.
More deals are expected on the horizon following Ukraine’s land-market reforms at the start of the year which “continues to unlock private investment potential in Ukrainian agriculture,” KPMG said.