UDB Foreword

 – The misconceptions vs true opportunities – 

​Despite ongoing hostilities for over three years, we have not encountered many high-quality, cash-generating, export-oriented Ukrainian businesses being marketed at distressed valuations. Where such opportunities do emerge, cash-rich domestic players — who currently hold an estimated UAH 850 billion (approx. US$ 23 billion) in readily deployable dry powder — are better positioned to pick up these low-hanging fruits, often outbidding even opportunistic foreign buyers.​Although Ukraine’s GDP remains approximately 25% below pre-war levels, sector performance is increasingly divergent. Consumer-facing industries, buoyed by substantial military-related payouts, have surpassed pre-war highs, while construction and real estate remain roughly 50% below in hard currency terms. Due to capital controls enforced by the National Bank of Ukraine, local corporates cannot upstream capital through dividends or loan repayments to their foreign parent companies and, in some cases, are restricted from repaying commercial debt to offshore lenders. This has forced companies to either hold excess liquidity in UAH-denominated deposits or invest in domestic government bonds as a hedge against inflation, which remains at c. 15% annually.​Despite abundant liquidity inside Ukraine, foreign strategic and portfolio investors could still gain an edge over locals in pursuing lucrative deals. While local buyouts up to US$ 5–10 million are typically executed in UAH, sellers of premium-quality assets generally prefer hard currency — a scarce commodity among domestic corporates. As a result of this transaction currency mismatch, a hefty valuation gap emerged between UAH and hard currency denominated M&A deals. In a recent landmark transaction exceeding US$ 150 million, KyivStar — Ukraine’s largest mobile operator—acquired a 98% stake in Uklon, the country’s leading ride-hailing service, at a 20x LTM EV/EBITDA valuation. This valuation aligns with global listed peer multiples, with no Ukraine-specific sovereign discount applied. We believe this outcome was largely due to the transaction being closed in UAH, facilitating deployment of KyivStar’s excess local liquidity. A 30–40% valuation discount would likely have applied if it had been denominated in hard currency.​Foreign investors are also structurally better positioned to execute relatively large leveraged buyout deals involving tickets of US$ 50 million or more — an investment scale within reach of just a handful of domestic players. For example, in September 2024, a consortium led by NJJ Holding (the investment vehicle of Xavier Niel, founder of the European telecom group Iliad) acquired Datagroup-Volia and Lifecell—Ukraine’s leading fixed-line and third-largest mobile operators, respectively — for approximately US$ 625 million. Of this, US$ 435 million was provided as a long-term non-recourse debt facility by the EBRD and IFC, backed by European Commission and French sovereign guarantees under the Ukraine Facility program. We estimate that, under this capital structure, private investors could realise annual FCFE yields exceeding 40%. By the same playbook, a reputable foreign investor may secure decent risk-weighted returns by tapping concessional debt financing from IFIs via Ukraine Facility guarantees.​The war-driven developments outlined above are well complemented by emerging economies' general development trends taking shape in Ukraine. The defining one is the departure of so-called "red directors" — Ukrainian businessmen who started their venues after the collapse of the Soviet Union in the 1990s. Due to a lack of proper corporate governance and succession planning, such businessmen are looking for ways to "exit" their businesses due to their age. Such deals include best-in-class asset-heavy businesses, such as the large Ukrainian construction materials producer, wood processing, agri and pharma groups.​On the JV side, prominent Ukrainian sponsors are increasingly expanding into adjacencies unrelated to their core operations. Notable examples include: (i) Ukraine’s largest drogerie retail chain, employing 30,000 people, which is co-developing the country’s first nationwide logistics platform — comprising 1 million sqm across Kyiv, Odesa, Dnipro, and Lviv – with a US$ 700 million project budget and anchor tenancy commitments from its core business; and (ii) one of Ukraine’s largest industrial groups, currently developing the first domestic float glass production facility to substitute imports from Russia and Belarus, which accounted for 90% of market supply pre-war.​These and other vetted opportunities — totalling over US$ 3 billion in aggregate deal value across seven priority sectors – are featured in the inaugural Ukrainian Deal Book. This represents only a subset of our broader pipeline. We encourage investors to reach out directly for tailored deal sourcing if a specific opportunity is not included.