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Mergers and acquisitions in Ukraine set new records in 2007, says Ernst & Young report
KYIV, 30 JULY 2008 — In 2007, the Ukrainian mergers and acquisitions (M&A) market increased threefold and reached US$15.1 billion, according to the fifth annual overview of the M&A market in the CIS from Ernst & Young. The growth rate of the Ukrainian M&A market was one of the highest in the CIS in 2007. Increasing transparency of the market, as well as legislative developments and Ukraine’s upcoming accession to the WTO, encouraged foreign investors to expand their presence.
Significant growth was shown in the metals and mining industry, with a total deal value in the sector of US$7.2 billion. The financial sector accounted for US$4.4 billion in deal value and 25% of all transactions. Another strong performer in 2007 was the food and beverage industry, with an estimated US$1 billion in total deal value.
Foreign companies in 2007 continued their expansion in the Ukrainian market, accounting for more than 65% of deal value and about 70% of deal number. High interest was shown in the financial and metals and mining sectors. Outbound acquisitions still represent a low share — 6% of total deal value (about US$900 million).
Eric Kadyrov, Director, Leader of Corporate Finance with Ernst & Young Ukraine, says: "We expect to see overall positive trends in Ukrainian M&A market with further increase in both deal numbers and overall volumes. This will be driven by combination of growth and consolidation in consumer driven sectors like retail, financial services, transportation & logistics and manufacturing, pharmaceutical and other sectors. With global liquidity crunch and slow down of IPO markets we also expect to see further increase of private equity transactions which becomes a good alternative to debt or capital markets financing."
Other key findings of the survey:
- In Russia the M&A market value reached US$131.7 billion in 2007, almost twice the figure for 2006. The total number of transactions increased by 33% to reach approximately 590. The largest transactions were made in the oil and gas, utilities, and metals and mining industries. In terms of deal number, high activity was also found in the financial, construction and real estate, telecoms and retail sectors.
- In Kazakhstan the total value of M&A transactions market in 2007 reached approximately US$13.2 billion, a growth of 60% from the previous year’s figures. M&A deals in Kazakhstan are mainly concentrated in the oil and gas, metals and mining, and financial sectors.
- The markets in other CIS countries are characterized by a higher risk and higher expected returns. The growth of transactions in the countries of Central Asia, the Caucasus, Belarus and Moldova will depend on structural reforms, political developments and legislative improvements.
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