In this Kyiv Post interview, Iryna Marushko, Partner with Lavrynovych & Partners, said she expects conservative growth in M&A activity with respect to Ukrainian assets.
Kyiv Post: Do you see the Ukrainian M&A market to recovering to pre-crisis levels? If so, when and what sectors will be most attractive?
Iryna Marushko: It is hard to expect the M&A market recovering to pre-crisis level in 2012. I would look at a longer term perspective. However, even if the prerequisites will arise, M&A activity will demonstrate conservative approach.
KP: For the selling side, is now an optimal time for a Ukrainian business owner to sell? Or would it be best to wait a year or two? And for the buying side, is now an optimal time to for a foreign investors to buy an asset in Ukraine, or would it be best to wait a year or two?
IM: It is obvious that currently it is generally a good time to buy in terms of price. However, foreign investors will take into account other factors such as the taxation system, foreign investments protection, the judicial system, political stability and predictability. Thus, it is unlikely that we will see more or less substantial buying activity from foreign investors.
KP: What are the top five risks investors face when buying assets in Ukraine and what strategies and measures can they adopt to main ensure that they get a fair price for assets bought in Ukraine while minimizing risks of potential problems related to the assets?
IM: If we leave aside political, macroeconomic risks as well as risks related to corruption and increasing governmental intervention, the legal risks spring mostly from a not transparent and stable law, unclear property rights, and unpredictability of judgments.
Given this the buyer needs to get clear picture of a target by diligencing it, get the flaws cured by the seller to the extent agreed, to assess not cured important findings and ensure that the seller is responsible for undisclosed damages after closing and the portion of the purchase price is available for the buyer to cover such damages.
The buyer should also ensure that it gets not only corporate control but an operational one as well in due manner. The target may also need to be restructured before acquisition to build a transparent corporate structure and to avoid risks inherent in the initial structure.
