Before the financial crisis of the late-2000s, private equity funds (PEFs) were quite active on the Ukrainian M&A market. At that time, they primarily targeted rapidly growing financial and real estate industries, which then became the most affected by the crisis. Today we are seeing some renewal of interests of private investors in Ukrainian companies, but in completely different areas: agriculture, technology, and energy.
A number of our clients who earlier invested in real estate and banking now are exploring the possibility to invest money in the three areas listed believing that they will be more or less stable in the current market conditions and be able to ensure quick returns on investments made. This change in the direction of PEFs is in line with global trends. The evidence of this is that more and more of Eastern European companies in recent years underwent an IPO on the world’s largest stock exchanges are engaged in agricultural, technology or energy businesses.
Most often private equity funds enter the Ukrainian market via purchase of shares or equity interest in a target company. This is rarely a combination of share/equity interest purchase and financing. The amount of stock being purchased depends on the way in which each particular fund does business: some funds invest money only through majority stake acquisitions and exercise full control over the target, while some other purchase only minority stakes and do not engage in the target's business at all. Also, this depends on the target, its financial condition, management and potential for growth. In our practice, we also encountered a step-by-step acquisition, when the purchase price for the next portion of shares was calculated on the basis of the financial results of the target.