HORIZONS | BDO'S GLOBAL VIEWOF MID-MARKET DEAL ACTIVITY 03
WHAT DOESTHE FUTURE HOLD FORUKRAINE? WHY UKRAINE HAS THE POTENTIAL TO BECOME THE EU’S LARGEST INVESTMENT AND RENAISSANCE HUBWHENTHEWAR ENDS.
BEFORE THEWAR – A STRONG ECONOMY From 2009 to 2013 Ukraine saw
continuous GDP growth, reaching USD 183.3bn in 2013. However, as a result of Russian aggression against Ukraine in 2014, which saw Russia annex Crimea and occupy part of the Donetsk and Lugansk regions, the Ukrainian economy and investment climate collapsed. In 2014 GDP fell by 21.1% to USD 131.8bn and in 2015 dropped by another 31.3% to USD 90.6bn, a fall of 50% in just two years. As a result the country’s M&A market dropped from about USD 4bn in 2013 to USD 410m 2015. At the end of 2014/beginning 2015 the conflict was frozen in Eastern Ukraine, while part of the Donetsk and Lugansk region was left under occupation and was no longer under Ukrainian control. The economy started to recover with Ukraine’s Government making economic, legal and regulatory reforms towards the implementation of EU standards. As a result, the investment climate improved and the M&A market grew to USD 1.6bn in 2019. However, as with all economies around the world, the COVID‑19 pandemic had a severe impact, and the M&A market declined sharply to USD 190m in 2020. After most COVID-19 restrictions were lifted, and due to pent-up demand, 2021 was a very successful year for the country’s economy: GDP grew to almost USD 200bn, overreaching 2013 levels, and according to estimates the M&A market reached almost USD 2.7bn with 120 deals. However, a few big deals which were signed at the end of 2021 are still pending and are not yet closed, with buyers citing ‘adverse change clauses’.
• Ukraine is the second largest country in Europe and has a coastline along the Sea of Azov and the Black Sea. It covers about 600,000 km2, with a population of about 42 million. It was about 47 million before 2014, when Russia annexed Crimea and occupied part of the Donetsk and Lugansk regions of Ukraine. Russia started a war against Ukraine in February 2022. As a result, around 10.5 million people have moved from their homes, including four million people, mainly women and children, leaving Ukraine as refugees, and about 6.5 million moving mainly toWestern Ukraine • Ukraine has been named one of the largest agriculture and food producers/ guarantors for world food security • According to the Global Sourcing Association, Ukraine is the #1 outsourcing destination globally and has more than 200,000 highly‑skilled IT professionals • Many IT and tech start-ups have originated fromUkraine and their founders raised USD 2.35bn in 2021 (mainly not accounted for in the M&A market size of Ukraine as most of these start-ups’ head offices moved to either the US or the EU).
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