In March 2014, this blog featured an article discussing the effect of the recent crisis in Ukraine on M&A activity. The crisis began in November 2013 when Ukrainians protested en masse after then-president Viktor Yanukovych failed to sign an association agreement with the European Union. Yanukovyvh was ousted in February 2014. During that time and following, violent protest, armed conflict between separatist forces and the Ukrainian government, and the annexation of Crimea by Russia, played a substantial role in the contraction of Ukraine’s economy by 8% in the year 2014. Since this time, Ukraine has undertaken a number of steps that may signal an improvement in the economy. For example, on January 1, 2016, Ukraine officially joined the Deep and Comprehensive Free Trade Area to reduce trade barriers with the EU markets and enhance regulatory standards.

Since Ukraine’s economy is highly dependent on two highly polarized parties – the EU and Russia – any improvements to relations with one trading partner incites tension within the other. A recent report by MergerMarket Group, Open for Business: M&A in Ukraine, highlights the contraction of Ukraine’s M&A activity in recent years. According to the report, M&A deal volume in 2015 decreased to only 26 deals worth a total of USD $150 million. In contrast, there were 34 deals worth a total of USD $831 million in 2014.


On the flipside, the report notes the upward potential for M&A activity in several key industries, including financial services, energy, mining, utilities and telecommunications. One key finding is that although there are only four reported deals in Q1 of 2016, the total value of those deals already surpasses the total value of all deals conducted in 2015.

Although the financial services sector is likely the most viable target for future M&A activity, the improvement of Ukraine’s economy will depend on enhanced privatization of state-owned enterprises. Ukraine’s State Property Fund, its privatisation authority, is planning to sell approximately 88 state enterprises in 2016. The sale of these large assets, encouraged by planned tax reforms, efforts to counter corruption and greater protection for minority shareholders, could help lift Ukraine out of its crisis.

The author would like to thank William Goldbloom, articling student, for his assistance in preparing this legal update.

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