Private Equity News Ukraine: Latest Developments in the Ukrainian Private Equity Industry

Private equity in Ukraine has been making headlines recently, as the industry continues to thrive despite the country's ongoing conflict with Russia. Despite the uncertainty caused by the invasion, new data shows that Ukraine's emerging private equity and venture capital markets are still active, with private equity houses continuing to do deals.

The turmoil of Russia's attack on Ukraine has had a significant impact on private equity markets across the region, but investment in Central and Eastern Europe (CEE) remains strong. From Estonia in the north to Bulgaria in the south, the CEE region enjoyed a dealmaking boom last year, and Ukraine remains a key player in the market. Investors are bracing themselves for the indirect impact of the crisis on private markets portfolios, with governments around the world working together to inflict "maximum pain" on Putin's regime.

Key Takeaways

• Despite the ongoing conflict with Russia, Ukraine's emerging private equity and venture capital markets are still active.

• The crisis in Ukraine has had a significant impact on private equity markets across the region, but investment in CEE remains strong.

• Investors are bracing themselves for the indirect impact of the crisis on private markets portfolios.

Ukraine's Private Equity Landscape

Despite the uncertainty caused by Russia's invasion, new data shows that there is still life in Ukraine's emerging private equity and venture capital markets. Private equity houses are still doing deals in the war-torn country.

The Ukrainian Venture Capital and Private Equity Association (UVCA) is the main industry body representing the interests of private equity and venture capital firms in the country. According to UVCA, the Ukrainian private equity market has been growing steadily over the past few years, with total assets under management (AUM) of private equity firms reaching $1.2 billion in 2021.

The majority of private equity firms in Ukraine are focused on the technology sector, which is the fastest-growing industry in the country. In 2021, the technology sector accounted for 80% of all private equity deals in Ukraine. Notable investments include the $50 million funding round raised by Grammarly, a language-learning platform, and the $30 million funding round raised by People.ai, an AI-powered sales management platform.

Furthermore, Ukraine's government has been actively promoting the country as an attractive destination for foreign investors. The government has implemented several reforms aimed at improving the business climate in the country, including simplifying the process of starting a business and reducing the tax burden on companies.

Despite these positive developments, Ukraine's private equity market still faces some challenges. The country's legal system is still developing, and corruption remains a significant issue. Additionally, the ongoing conflict with Russia has created political and economic instability in the country.

Overall, Ukraine's private equity landscape is still in its early stages but has shown promising growth in recent years. With the government's continued efforts to improve the business climate and the country's growing technology sector, Ukraine's private equity market is expected to continue to attract investment in the coming years.

Impact of War on Private Equity

War and Uncertainty

The ongoing war in Ukraine has had a significant impact on the country's private equity industry. The uncertainty caused by the conflict has made many investors hesitant to invest in the region, resulting in a decrease in deal activity. According to Pitchbook data, private equity deal activity in Ukraine fell from $20m in 2021 to below $4m last year, with deal count halving from eight to four.

The uncertainty created by the conflict has also led to a more segmented market for capital, with geopolitical rifts making it increasingly difficult for private equity firms to invest in the region. This has made it challenging for investors to assess the risks and rewards of investing in Ukraine's private equity and venture capital markets.

Despite the challenges posed by the conflict, new data shows that there is still life in Ukraine's emerging private equity and venture capital markets. The country's venture capital industry showed more signs of life, with deal value actually rising year-on-year from $14.1m to almost $15m. This suggests that, despite the ongoing conflict, there are still opportunities for investors in Ukraine's private equity and venture capital markets.

Overall, the impact of the war on Ukraine's private equity industry has been significant, with uncertainty and geopolitical rifts making it increasingly difficult for private equity firms to invest in the region. However, despite the challenges posed by the conflict, there are still opportunities for investors in Ukraine's emerging private equity and venture capital markets.

Investment Opportunities in Ukraine

Despite the ongoing political and economic challenges, Ukraine has been attracting a growing number of foreign investors in recent years, particularly in the private equity and venture capital sectors. According to a report by Deloitte Ukraine and the Ukrainian Venture Capital and Private Equity Association (UVCA), the total amount of investments in Ukrainian startups reached $510 million in 2021, which is a record high for the country.

One of the reasons for increased investment in Ukraine is the country's large and highly skilled workforce, which is particularly strong in the IT and tech sectors. Ukraine has become a hub for IT outsourcing, with many multinational companies setting up development centres in the country. This has led to a growing number of successful startups, particularly in the fintech, e-commerce, and software development sectors.

Another factor contributing to Ukraine's attractiveness as an investment destination is the country's strategic location between Europe and Asia. This makes it an ideal gateway for companies looking to expand their business into new markets. Additionally, Ukraine has a large domestic market, with a population of over 40 million people, which presents significant opportunities for consumer-focused businesses.

The Ukrainian government has also been making efforts to improve the investment climate in the country. In recent years, the government has introduced a number of reforms aimed at reducing bureaucracy and corruption, improving the tax system, and attracting foreign investment. These reforms have helped to create a more business-friendly environment, making it easier for companies to operate in Ukraine.

In terms of specific investment opportunities, there are several sectors that are particularly attractive for private equity and venture capital investors. These include:

• IT and tech: As mentioned earlier, Ukraine has a highly skilled workforce in the IT and tech sectors, which has led to a thriving startup ecosystem. Many of these startups are focused on developing innovative software solutions, particularly in areas such as artificial intelligence, blockchain, and cybersecurity.

• Agriculture: Ukraine has a large and fertile agricultural sector, which presents significant opportunities for investment. The country is one of the world's largest producers of grain, and also has a strong livestock industry. With growing global demand for food, there is significant potential for investors in this sector.

• Infrastructure: Ukraine has significant infrastructure needs, particularly in areas such as transport and energy. The government has been actively seeking private investment in these areas, with a number of major projects currently underway. These include the construction of new highways, railways, and airports, as well as the development of renewable energy sources such as wind and solar power.

Overall, Ukraine presents a range of attractive investment opportunities for private equity and venture capital investors. While there are still challenges to doing business in the country, the government's ongoing reforms, combined with Ukraine's skilled workforce, strategic location, and growing startup ecosystem, make it an increasingly attractive destination for foreign investment.

Dealmaking in Ukraine's Private Equity

Despite the ongoing unrest and political instability, Ukraine's private equity industry is still active and growing. In the first quarter of 2022, there were 11 VC deals in Ukraine, totalling $11.5m, with investments ranging from fintech to healthcare startups [1].

PE deal activity in Ukraine fell from $20m in 2021 to below $4m last year, with deal count halving from eight to four, according to Pitchbook data. However, the country's venture capital industry showed more signs of life, with deal value actually rising year-on-year from $14.1m to almost $15m [5].

One of the most significant deals in Ukraine's private equity industry was the acquisition of SoftServe, a digital services company, by a consortium led by global investment firm Warburg Pincus. The deal was valued at $1.5bn, making it the largest ever private equity transaction in Ukraine [1].

Ukraine's tech sector is also attracting significant investment, with Ukrainian startups attracting venture capital investments worth $779.6m in 2021, a 46% increase from 2020 [2]. The country's tech sector has been growing rapidly in recent years, with the number of IT specialists in Ukraine growing from 50,000 in 2015 to over 200,000 in 2021 [2].

Despite the challenges posed by the ongoing conflict, Ukraine's private equity industry is showing resilience and continued growth. Investors are attracted by the country's skilled workforce, low operating costs, and growing tech sector. With the right investment and support, Ukraine's private equity industry has the potential to become a major player in the global market.

[1] Source: PE News

[2] Source: UVCA

[5] Source: PE News

Visualising Private Equity in Ukraine

Despite the ongoing conflict with Russia, private equity in Ukraine has continued to grow. In 2021, the country saw a total of 39 private equity deals, with a total value of $1.1bn. This is a significant increase from the previous year, which saw 28 deals worth $500m.

To better understand the private equity landscape in Ukraine, let's take a closer look at some key data points:

Top Private Equity Firms in Ukraine

According to a report by Ukrainian Venture Capital and Private Equity Association (UVCA), the top private equity firms in Ukraine in terms of deal count in 2021 were:

• Dragon Capital

• Horizon Capital

• AVentures Capital

• ICU Ventures

• Genesis Investments

Private Equity Deals by Sector

The UVCA report also highlighted the sectors that received the most private equity investment in Ukraine in 2021:

• IT and software

• Consumer goods and retail

• Healthcare

• Agriculture and food

• Energy and utilities

Private Equity Deals by Stage

In terms of deal stage, the UVCA report found that the majority of private equity deals in Ukraine in 2021 were early-stage investments:

• Seed and angel rounds: 24%

• Series A: 28%

• Series B: 15%

• Later-stage rounds: 33%

Private Equity Deals by Region

Finally, the UVCA report also looked at the regions of Ukraine that received the most private equity investment in 2021:

• Kyiv: 66% of total deal value

• Lviv: 8% of total deal value

• Kharkiv: 6% of total deal value

• Odesa: 5% of total deal value

• Dnipro: 3% of total deal value

Overall, these data points paint a picture of a growing and diverse private equity industry in Ukraine, despite the challenges posed by the ongoing conflict with Russia. With a focus on early-stage investments in sectors such as IT and healthcare, as well as a concentration of investment in the capital city of Kyiv, private equity in Ukraine is poised for continued growth in the years to come.

Conclusion

Private equity in Ukraine has been affected by the Russian-Ukrainian conflict, but it continues to roll on. Despite the uncertainty caused by the conflict, new data shows that there is still life in Ukraine's emerging private equity and venture capital markets. The conflict has created a fractured world, which means more segmented markets for capital, and private equity firms need to find new ways to respond and reposition themselves during this crisis.

The impact of the conflict on private equity has been examined by Shanu Sherwani, a private equity analyst, who notes that asset managers and institutional investors have announced their disengagement in response to Russia's invasion of Ukraine. Some are doing so to meet ESG criteria, while others are trying to escape penalties. As the war in Ukraine moves into its second month, private equity firms and investors continue to grapple with both the humanitarian crisis and a shaky business environment.

Private equity firms and investors need to find ways to respond and reposition themselves during this crisis. Bain & Co. has suggested that private equity firms should focus on building strong relationships with their portfolio companies, as well as with other stakeholders such as regulators, local governments, and the media. They should also consider investing in sectors that are less vulnerable to the conflict, such as healthcare, education, and consumer goods.

Overall, private equity in Ukraine is still alive and kicking, despite the challenges posed by the conflict. Private equity firms and investors need to be proactive and find new ways to respond and reposition themselves during this crisis. By building strong relationships with their portfolio companies and investing in less vulnerable sectors, they can weather the storm and emerge stronger on the other side.

Frequently Asked Questions

What impact has the war in Ukraine had on private equity investments in the country?

The war in Ukraine has caused uncertainty and instability in the country, but private equity houses are still doing deals. According to PE News, Ukraine's emerging private equity and venture capital markets are still active, and investors continue to see opportunities in the country.

Are private equity investments in Ukraine slowing down?

There is no clear evidence that private equity investments in Ukraine are slowing down. Despite the war in the country, new data shows that there is still life in Ukraine's private equity and venture capital markets. According to PE News, private equity houses are still doing deals in the country.

What are the current trends in private equity investments in Ukraine?

The current trends in private equity investments in Ukraine include a focus on technology, agriculture, and infrastructure. According to Moonfare, investors are also looking for opportunities in sectors that are less affected by the war, such as healthcare and education.

How has the private equity industry in Ukraine evolved in recent years?

The private equity industry in Ukraine has evolved significantly in recent years. According to Delano, the industry has become more sophisticated, and investors are increasingly looking for opportunities in sectors such as technology and infrastructure. The war in the country has also led to a greater focus on risk management and due diligence.

What sectors in Ukraine are attracting the most private equity investment?

The sectors in Ukraine that are attracting the most private equity investment include technology, agriculture, and infrastructure. According to Moonfare, investors are also looking for opportunities in sectors that are less affected by the war, such as healthcare and education.

What are the prospects for private equity in Ukraine in the coming years?

The prospects for private equity in Ukraine are positive in the coming years. Despite the war in the country, investors continue to see opportunities in Ukraine's emerging private equity and venture capital markets. According to PE News, the private equity industry in Ukraine is expected to continue to grow in the coming years.

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