My first day at work here in Ukraine was not great.
Ex-Prime Minister Yulia Tymoshenko was locked up for seven years [on Oct. 11], and the mood in business meetings was as grim as I had ever witnessed at any point in my career so far.
“Why have you come to Ukraine, just as everyone is leaving?” asked one person.
“What’s the point of having an English-qualified M&A [mergers & acquisitions] lawyer here when there are no M&A deals, and no rule of law?” asked another.
“If I was you I would get on the first plane back to the UK,” said yet another.
It did not get better, and in fact the impression I built over the next few weeks was that the entire business community of Ukraine had been brainwashed to sing along to exactly the same song, as loudly as possible, in the same dreary unison tones to the same broken record.
“X company is being raided by He-Who-Should-Not-Be-Named.”
“Y company is pulling out of the country.”
“The country is being run by criminals.”
“There’s no funding.”
“There are no jobs.”
“There’s no hope.”
Well, I beg to differ. Yes, this country faces problems right now. Yes corruption is rife. Yes there are liquidity problems. Yes, businesses have gone bust, and yes more will go bust.
But are these problems that are unique to Ukraine? No.
OK, things may be worse here than elsewhere, but there are reasons for that, and to write the entire country off the business map because of that is like a doctor treating patients with the common cold, but refusing to see those with the flu.
This country has enormous potential.
One can feel that simply from living here.
The people are educated, smart, ambitious, warm and friendly. Add such ingredients to a country which is rich in resources and whose foreign and direct investment figures are significantly lower than like countries (i.e. there is value to be captured by investors), then we have the basic, but essential, ingredients to make this a success story.
Everything else can be fixed. And it will be fixed. It’s just a matter of time.
The Ukrainian people are not the type of people who will sit back and let themselves get trampled upon. There’s only so much they will take, and the government knows this.
And what’s more, the outside world will not allow them to get trampled upon – Ukraine is too strategically important for neighboring countries to sit back and let it spiral downwards into a black-hole. Things will get better.
In the meantime, there are things to be positive about.
It is a myth, for example, that there is no funding out there. There is plenty of funding out there. Private equity and venture capital funds, for example, especially those that raised their funds before the onset of the crisis, have significant amounts of “dry powder” on their books – i.e. funds that were raised but which have not yet been spent.
Such funds need to be spent, otherwise fund managers will lose their management fees (which are typically calculated against the amount of ‘committed funds’ or the amount of funds ‘under management’) and will find it harder to raise funds if/when the world returns to normal again.
It is a myth, therefore, that funding is not available right now. It is available, but it is being spent elsewhere, principally (in terms of Europe at least) in Poland and Turkey.
Yes, private equity funds may be a little more cautious about Ukraine given what is going on, and they may therefore need a little more hand-holding. But funding is nevertheless out there for businesses that show potential, and which have (or could potentially have) the right management.
A view of Lviv at sunset on Jan. 11. The largest city in western Ukraine will be the scene of matches during the Euro 2012 football championships, to be co-hosted in Poland and Ukraine from June 8
to July 1. (AFP)
Private equity funds don’t need rocketing levels of annual gross domestic product growth to make the country interesting. They simply need to know that their investment is likely to be safe, and that they will be left alone to get on with what they do best – namely bringing funding, international management and sector expertise, and future exit opportunities to existing companies and their owners.
OK, some funds may be nervous about the country’s (or, more correctly, the country’s courts) perceived disrespect of the rule of law. But this too can be mitigated, for example, by structuring transactions such that disputes will be resolved outside of Ukraine, by investing in industries that are “off the radar screen” or too complicated for troublemakers to understand, by investing in companies (e.g. IT companies) that are de facto based on the ground here in Ukraine, but which in reality are servicing clients (and deriving most of their revenue from) outside of Ukraine, or by teaming up with strong and prominent local entrepreneurs or businesses.
Opportunities are therefore out there, and my prediction for the year ahead is that existing stakeholders and entrepreneurs will increasingly come to recognize the benefits of having private equity/venture capital funds involved in their businesses – and this will be a good thing for those businesses, and for the business environment as a whole.
Ukraine should not be written off the business map. It will get to where it needs to be eventually.
In fact, as I was writing this, a “Visit Ukraine” advertisement (quite an impressive one, I must say) appeared on BBC World News.
I flicked over to CNN, and I then discovered an interview with Ukraine’s deputy prime minster which involved the deputy prime minister personally escorting the CNN interviewer around Ukraine with a view to demonstrating that Ukraine is a country that is ready for EURO 2012.
Does this sound like a country that doesn’t care about its image in the West?
Or a country that’s quite happy to maintain the status quo and continue to miss out on foreign capital inflows?
Not to me it doesn’t.
I have travelled all over the world, and lived in countries quite similar to this. This country feels different. Very different. The sense of future opportunity has struck me harder than it has struck me ever before.
Perhaps my hunch may turn out to be wrong. But I don’t think it will be, and I am prepared to put my money where my mouth is. How? By ignoring the person who told me to get on the first plane back to the
United Kingdom, and staying put.
I won’t be going anywhere anytime soon.
Lawyer Graham Conlon has just recently relocated from London to the Kyiv office of CMS Cameron McKenna. His biography can be found here: http://www.cms-cmck.com/graham-conlon
