Klaus Kessler

Phone: +380 (44) 586 23 03

Acquisitions of the existing companies (as brownfield investments) have become an important issue in Ukraine. The Ukrainian M&A market is of interest for major foreign and domestic companies and corporations – and not only them. An acquisition of the existing business may be attractive for a medium sized German company as a good option to establish a presence or to expand at the Ukrainian market. The number of brownfield investment acquisitions has dramatically increased in Ukraine since recently – and in particular in finance and banking and in the real estate segment where most of the acquisitions take the form of a Ukrainian SPV acquisition. A boom is expected in the alternative energy segment owing to certain amendments to the Ukrainian laws.

The legal framework has improved considerably for brownfield investment acquisitions. The Ukrainian antimonopoly law is comprised of several legal acts ensuring protection from unfair economic competition. Those legal acts are undergoing the continuous improvement process to rectify the identified deficiencies and gaps in the law. The national antimonopoly committee has been established to supervise the compliance with the antimonopoly law and to apply penalties to offenders.

A comprehensive Legal, Tax and Financial Due Diligence must be performed with due consideration of the local specifics prior to any acquisition in Ukraine – notwithstanding whether you are acquiring a whole Ukrainian company or only an interest therein. ‘Trust but verify’ principle still applies in Ukraine and it would be unwise to disregard it in connection with a prospective acquisition. In addition it is recommended typically to also perform a Due Diligence of the seller because the seller will be your counterpart under the SPA to be concluded.

Our M&A team jointly with our tax counsels will support you in connection with the optimum structuring of your acquisition transaction. We will assist you from the very outset during the drafting of the Confidentiality Agreement and Letter of Intent within the framework of the Due Diligence, and also during the negotiations and drafting of the SPA – all the way to the Transaction Close.

Joint Ventures with Ukrainian partners have increasingly gained in importance during the last few years – next to brownfield investments. The reasons cited typically are multiple and diverse, although they are not always convincing. Very often the key arguments include: shared resources, technology and knowhow, market insider expertise which enable the parties to optimize their economic opportunities in Ukraine. However, usually the local know-how or ‘contacts’ are obviously not the only or main reason.

A comprehensive appraisal of the situation would be required to determine if it is worthwhile and feasible to start a joint venture with the Ukrainian partner. However, the risk of a possible conflict of interests should never be excluded because it may lead subsequently to the failure of the joint venture. Therefore, it would seem vital to identify similar interests (including long-term ones) in order to minimize such risks, and to develop a set of rules for dealing with such situations. The mandatory corporate law of Ukraine applies to any joint venture established in Ukraine – basically it is similar to the European corporate law, but less permissive (i.e. the number of available options is lower). Therefore a careful legal approach should be adopted to formalize the business relationship and thus to minimize the investor’s risks and establish a sound legal footing for the joint venture.