You're reading: Good news may come on M&A market if Russia stops waging bloody war against Ukrainian state

Graham Conlon, partner at CMS Cameron McKenna law firm, foresees a boom in Ukraine’s mergers and acquisitions market now that the nation has elected Petro Poroshenko as president in a transparent and democratic process.

Next year, if the separatist tension in eastern Ukraine eases, the market will grow significantly, adds the English lawyer who has been residing in Kyiv since 2011.

“This country is one of the most exciting countries in the entire world, because if you look at all the other countries around here, almost all of them have received fine direct investments maybe within the last 20 years,” says Conlon. “Ukraine has received comparatively less because of the fact it is quite difficult to do business here, and now you have a country with a president, so mergers and acquisitions will come back.”

In the law firm’s 2013-2014 M&A report for Eastern Europe, Conlon wrote that Ukraine had some bright spots in foreign direct investment, such as Shell’s potential $10 billion investment in shale gas.

But foreign direct investment in the M&A sector presented a more depressing picture.

“FDI in the M&A sector was muted and we witnessed a number of high profile exits from the country – in particular in the banking sector. The outlook in Ukraine for 2014 is currently unclear, especially in light of the current political climate, but currently we see it much the same as in 2013 – comparatively little FDI, but with a number of high profile M&A deals being carried out by and amongst Ukraine’s elite, backed by a few more high profile strategic exits,” he added.

Russian-backed militants attack a branch of Privatbank in the eastern Ukrainian city of Donetsk on April 28. Some 300 masked pro-Russian militants wielding baseball bats attacked a branch of the bank owned by an oligarch regional governor who has voiced criticism of Moscow. The gang attacked the Donetsk office of the powerful Private banking and metal industry holding belonging to Igor Kolomoisky, a billionaire who is also governor of the nearby region of Dnipropetrovsk. (AFP)

Agriculture, energy and information technology sectors are of special interest for foreign investors, Conlon said. The CMS Cameron McKenna partner hopes Ukraine will continue to encourage energy companies to come and do business here.

Having participated in a number of M&A deals involving the European Bank for Reconstruction and Development, Royal Bank of Scotland, HSBC and Eurasian Bank, the lawyer acknowledged that the Ukrainian government has to demonstrate commitment to combating corruption in order to convince the business community that it is serious.

Investors have mostly stayed away due to poor law enforcement, Conlon adds, including in which hostile company takeovers and raider attacks happen in a notoriously corrupt environment.

“I think that the EuroMaidan (Revolution) has changed the situation with Ukrainian courts,” says Conlon. He believes that the lustration process will help as corrupt judges lose their seats, though consulting from U.S. and other Western countries could make the process more fruitful.

Demand for merger-and-acquisition legal service has been weak due to political instability. However, investors realize that improving the legal environment is not a one-day mission, according to Conlon.

Securing a $17 billion bailout package from the International Monetary Fund along with implementing macroeconomic measures are important steps for Ukraine. Meanwhile, a free trade regime between Ukraine and the European Union will also attract investors. It became effective on March 11.

Investing in Crimea is another big problem for foreign players. The international community does not recognize Russia’s annexation, while Russia enforces its laws there. Investments there under Russian laws violate Ukrainian ones and vice versa, says Conlon.