Ukraine saw 55 percent fewer corporate mergers and acquisitions last year – or 111 overall – while their total value fell even more, by some 80 percent – to €912 million, according to CMS Cameron McKenna, a law firm, whose key mergers and acquisitions expert in Kyiv, Graham Conlon, believes 2015 will also be a difficult year.
Russian Alfa Group purchased the Ukrainian branch of Bank of Cyprus for €225 million, while Austrian AMIC Energy Management GmbH paid €223 million for Lukoil-Ukraine, an oil producer. These were the biggest deals.
“We were very busy up until probably February-March last year from an M&A perspective, but as soon as Crimea happened investors put projects on hold,” says Conlon. “They still have not cancelled them, they are waiting for things to get better but it is very difficult for an investor to come in now and invest with current uncertainty.”
When asked what attracts him in Eastern Europe, Conlon, a graduate of London Business School, says it’s the investment potential. Ukraine could become an investment hub for those who have interest in Eastern European emerging markets, he admits.
“Investors should not see Ukraine as Switzerland. Ukraine is not Switzerland and is not going to be Switzerland for quite some time,” he says. “What clients need to see is that Ukraine is making the concerted effort to become more investor-friendly and, crucially, to fight corruption. The laws here are not that bad. The problem is you never know whether you will enforce these laws.”
Many foreign investors who place capital in countries like Ukraine and Kazakhstan use the English law to protect their interests, Conlon explains. “It becomes obviously a little bit trickier because we have to make sure that what we are doing in English law also works in practice here in Ukraine.”
Recently introduced public access to the real estate registry is great news for investors, while the law on bringing the 60 percent corporate quorum down to 50 percent is a positive change too, “which will make it a little bit easier for investors to come in.”
“The key thing you need to be sure about as an incoming investor is that you will ultimately have control over a company,” Conlon adds.
Legal expert sees a bloated number of minority shareholders at some Ukrainian companies as a problem, since once an investor wants to consolidate his ownership over such an asset, he has to deal sometimes with thousands of shareholders. In developed economies, law usually implies that an investor who has a 90-percent stake may squeeze out the minority shareholders through forceful buyout of their stocks.
Some public offices still prefer the old corrupt ways and this is a problem. “In the past, we have found that at some occasions, applications by clients were rejected by Antimonopoly Committee for very tiny reasons. We all know why they were being rejected for such small reasons, but it is not good for the image of the country.”
Kyiv Post legal affairs reporter Maryana Antonovych can be reached at [email protected].
