Only 69 mergers and acquisitions took place in Ukraine in 2020, a 15% decrease compared to 2019, according to a report by international professional services firm KPMG published on April 6.
The total value of the contracts fell by 62%, reaching less than $1 billion for the year. The average deal value was $28 million.
Investors were reluctant to invest more amid the COVID-19 economic crisis as the country’s gross domestic product fell by 4.4% over the last year, according to KPMG.
“The economic slowdown induced by the pandemic made some investors adopt a more cautious approach to evaluating and negotiating deals in 2020,” the report read.
Ukraine’s gross domestic product is expected to grow by 5% in 2021, but a lack of reforms might delay the next tranche from the International Monetary Fund this year, potentially deterring investors.
The IMF has only loaned Ukraine $2.1 billion of the promised $5 billion so far, holding back the remaining $2.9 billion. The Ukrainian government’s decision to regulate household gas prices, its insufficient pace of reforms and other reasons led the IMF to put the program on hold.
This uncertainty will likely mean some investment decisions will be delayed, according to the auditor.
KPMG experts expressed “cautious optimism” because of a small increase in the number of agreements in the second half of 2021, but the future will depend on the pandemic and the resumption of business activity.
“We predict that momentum will really start to build up in the second half of the year, with a brighter outlook beyond this,” the report reads.
KPMG expects the same four sectors that dominated 2020 to attract investment this year too: technology and innovations, agriculture, real estate, transport and infrastructure. These sectors accounted for 60% of M&A-related transactions last year.
Ukraine’s largest export industry, agriculture, remains the focus for both domestic and foreign investors, while the digital transformation of the global economy accelerated by the pandemic helped drive demand for the tech sector.
Attractive returns on retail portfolios and increased demand for warehouses to stock e-commerce goods boosted construction; implementation of the law on concessions lured investment into Ukraine’s aging infrastructure.
