War fails to halt M&A activity in Ukraine, drives interest in new markets – KPMG M&A Radar 2024
Despite ongoing geopolitical uncertainty, Ukraine’s M&A market has continued to demonstrate resilience and adaptability, with signs of renewed activity in 2024. While domestic players remain actively engaged in dealmaking both in Ukraine and abroad, some foreign investors are taking a more cautious stance and awaiting clearer signals before fully committing to the Ukrainian market. These insights come from the latest KPMG in Ukraine M&A Radar 2024 report.
“Despite the ongoing war, Ukrainian businesses continue to pursue growth through diversification and international expansion, helping to sustain economic activity. One of the key drivers of domestic M&A transactions is Ukrainian enterprises accumulating capital, meaning that they are now seeking investment opportunities. Along with the introduction of war risk insurance mechanisms and government-led infrastructure recovery initiatives, these factors create more favourable conditions for the development of the Ukrainian M&A market. Despite a 15.7% decline in total overall deal value, adjusted figures that exclude exceptionally large transactions indicate a 40.5% increase. The number of transactions in 2024 remained the same as in 2023, underscoring the durability of the M&A market even in times of crisis and laying the foundation for further growth in 2025,” says Svitlana Shcherbatyuk, Director, Head of Transaction Services, Deal Advisory, KPMG in Ukraine.
DOMESTIC DEALS: GROWING OPPORTUNITIES AMID RECOVERY
M&A transactions involving Ukrainian investors continued to play a significant role in the domestic M&A market in 2024, accounting for 38.6% of total deal value and 53.1% of total deal volume. Despite macroeconomic challenges and capital outflow restrictions, the number of domestic transactions remained stable at 26 deals (compared to 25 in 2023). However, total deal value declined by 10.2%, down to US$406 million. This was driven by a 20.7% decrease in the average transaction size, which fell to US$24 million.
The largest sectors by domestic deal value were real estate and construction (US$209 million), industrial goods, and agriculture. Among the most notable deals were Dragon Capital’s acquisition of Karavan Outlet Mall in Kyiv (US$40–60 million) and the privatisation of the Hotel Ukraine by Maksym Kryppa (US$60 million).
OUTBOUND DEALS: UKRAINIAN BUSINESSES EXPAND GLOBAL PRESENCE THROUGH M&A
Ukrainian companies actively expanded their presence in international markets in 2024, completing 10 cross-border M&A transactions which accounted for 20.4% of all M&A deals. Among the key transactions, software development firm Ciklum acquired the US-based digital services company Infogen for US$30 million, strengthening its position in the IT sector. Power company DTEK entered the Polish renewable energy market with the acquisition of a 133 MW energy storage system for €30 million. Software engineering company Intellias, meanwhile, reinforced its presence in the US and the UK through the acquisitions of C2 Solutions and NorthLink Digital, respectively. Pharmaceutical giant Farmak also expanded operations in both Poland and the UK by acquiring Symphar and A&S Pharma, respectively.
INBOUND DEALS: REKINDLING INTEREST IN M&A IN UKRAINE
Despite ongoing war-related risks, foreign investors have maintained a level of interest in the Ukrainian market, accounting for more than 25% of total transactions and over 50% of total deal value in 2024.
The innovation and technology sector has remained the primary driver of inbound transactions to Ukraine, contributing seven deals worth a total US$287 million. Notably, Sapphire Ventures headed up a US$200 million investment round in Creatio, valuing the company at US$1.2 billion. Beyond IT, strategic acquisitions took place in other mainstays of the Ukrainian M&A market, namely: communications, metallurgy, and agriculture. Investment company NJJ Holding acquired communication company Datagroup-Volia for US$120 million, while Azerbaijan’s NEQSOL Holding entered the titanium market through the privatisation of Ukraine’s United Mining and Chemical Company for US$95 million. In line with its remit to seek out agri-food market opportunities, the Saudi Agricultural and Livestock Investment Company, or SALIC, acquired a 12.6% stake in leading Ukrainian aggrotech firm MHP.
Geographically, 73.5% of inbound M&A activity came from Europe and North America, with new entrants from Azerbaijan and Saudi Arabia further diversifying investor interest in Ukraine.
UKRAINIAN DEFENCE SECTOR GROWTH MEANS OPPORTUNITIES TO INTEGRATE WITH GLOBAL INDUSTRY
Ukraine is rapidly advancing its defence technology sector, driven by the prolonged war with Russia and rising demand for modern military solutions. Particular attention has been focused on the unmanned aerial systems (UAS) sector, as well as startups in communications, navigation, intelligence, electronic warfare, and robotics, which attracted investments from Ukrainian, European, and US funds in 2024. State initiative Brave1 continued to provide companies with financial support while offering organisational backing to accelerate development.
Global defence corporations are also increasing their presence in Ukraine. Germany’s Rheinmetall, the largest defence company in Europe, launched domestic production facilities in partnership with Ukroboronprom in 2024 and has announced plans to open a total of four manufacturing plants in Ukraine. Franco-German defence giant KNDS, meanwhile, announced the establishment of a Ukrainian subsidiary, while Czech firearms ammunition manufacturer Sellier & Bellot plans to build a facility for ammunition and firearms production in collaboration with Ukroboronservice.
UKRAINE STRENGTHENS ENERGY INDEPENDENCE THROUGH RECOVERY AND INNOVATION
Large-scale Russian attacks on Ukraine’s energy infrastructure in 2024 have continued to pose significant challenges for both Ukrainian business and citizens. However, these efforts to destroy Ukraine’s energy infrastructure have also accelerated sectoral reforms and the country’s push toward energy independence. As part of the National Energy and Climate Plan, Ukraine has introduced a US$78 billion investment portfolio for green energy projects, reaffirming its commitment to environmental goals despite the Russia’s ongoing aggression. The government of Ukraine has also launched several initiatives aimed at financing alternative energy projects, including zero-interest loans for citizens and the expansion of the “Affordable Loans 5-7-9%” programme to cover alternative energy sourcing which has facilitated the allocation of over UAH72.8 billion in credit funding to restore infrastructure.
The private sector has also been active in this area, with businesses investing in their own energy autonomy. Beyond power companies like DTEK allocating UAH11 billion for power generation repairs, home improvement chain Epicentr is working on expanding the independent solar power capacity of its stores, while courier service Nova Poshta and petrol station chain OKKO are both actively increasing their investments in a variety of innovative backup power sources. Inventive large-scale solutions to restoring power generation are also being implemented and explored, such transferring an entire dismantled combined heat and power plant from Lithuania to Ukraine and negotiations for leasing floating power stations from the Turkish company Karpowership.
The restoration of Ukraine’s energy system has also received substantial international support. The US and the EU allocated a combined €107 million to help restore DTEK capacities, while the US$825 million memorandum “On Cooperation to Ensure the Resilience of Ukraine’s Energy System” was signed with the US government in December 2024. The European Investment Bank (EIB) also launched a €600 million energy support plan targeting critical public and private sector projects, while the European Bank of Reconstruction and Development (EBRD) and Ukrainian natural gas company Ukrnafta signed an EUR80 million loan agreement to fund distributed gas power plants and cogeneration facilities.
UKRAINE’S TECH SECTOR STRENGTHENS ITS POSITION THROUGH INVESTMENT AND GLOBAL EXPANSION
Despite the challenges of war, Ukraine’s IT industry remains a key pillar of the national economy, contributing 4.4% of GDP in 2024. The total value of M&A transactions in the technology sector reached US$342 million, accounting for 33% of Ukraine’s overall M&A market. While export revenues in the sector declined by 4–6%, foreign investors remain the primary drivers of deal activity, representing 64% of total transactions (seven deals). The largest transactions included the aforementioned US$200 million investment round in Creatio led by investment firm Sapphire Ventures, and voice AI company SoundHound AI acquiring the online ordering platform Allset for US$35–40 million. Horizon Capital also continues to lead investment in Ukrainian companies, recently announcing its investment in pharma and life science marketing tech provider Viseven.
Ukrainian tech businesses have also intensified their international expansion, with 27% of total deals in IT sector involving the acquisition of foreign assets by Ukrainian investors. Software development company Ciklum acquired U.S.-based digital services company Infogen for US$15–30 million, while software engineering firm Intellias completed its acquisitions of C2 Solutions in the US and NorthLink Digital in the UK.
WAR RISK INSURANCE AS INVESTMENT STIMULUS
The development of war risk insurance mechanisms in 2024 has become a key factor in sustaining investment activity in Ukraine. The Ukrainian government introduced legislative changes that enabled investment insurance through the Export Credit Agency (ECA) which has already insured several projects, including the acquisition of a gas turbine generator for print company Flexores and the modernisation of food production company Vilis, amounting to a collective UAH92 million. International partners are also playing a significant role in expanding war risk insurance in Ukraine, with Lloyd’s of London and Marsh McLennan expanding their maritime insurance programme to cover industrial goods as well as globally vital grain shipments. The US, the EBRD, and insurance firm AON have launched war risk reinsurance mechanisms, including the €110 million Ukraine Recovery and Reconstruction Guarantee Facility (URGF) which will provide over €1 billion in annual insurance coverage for goods and transport.
Another major step forward has been the creation of the Ukrainian State Agency for War Risk Insurance which aims to centralise policy management and regulate the market. While some legislative challenges remain, these initiatives are helping to create a more secure investment environment by mitigating risks for both domestic and foreign investors.
OUTLOOK FOR UKRAINE’S M&A MARKET IN 2025: CHALLENGES, OPPORTUNITIES, AND GROWTH DRIVERS
Ukraine’s M&A market will continue to operate within a complex domestic and geopolitical landscape in 2025. The introduction of war risk insurance mechanisms is expected to attract new investments, with notable programmes including the aforementioned €110 million URGF initiative and FortuneGuard from insurtech accelerator Lloyd’s Lab and insurance companies McGill and Partners and ARX, which provides coverage of up to US$50 million per asset. Ukrainian military expenditures are also projected to rise to UAH2.23 trillion (26.3% of GDP), driving the growth of Ukraine’s defence industry through international partnerships and localised production.
The main challenge for Ukraine’s M&A market remains the lack of well-developed investment projects among 80% of Ukrainian companies which limits capital inflows. The recovery of the national M&A market will depend on macroeconomic stability, structural reforms, and the gradual restoration of investor confidence, along with increased domestic and international deal activity that can help contribute to Ukraine’s economic transformation. Future peace negotiations will play their own crucial role in shaping Ukraine’s economic prospects. It is hoped that a successful resolution to the ongoing invasion will create new opportunities for investment and business transactions, contributing to economic recovery and further development of the M&A market in Ukraine.
For more insights into Ukraine’s M&A market in 2024 and outlook for 2025, visit the following link: M&A Radar 2024: Ukraine | Market analysis – KPMG Ukraine
