Alexey Oleynikov, Managing Partner of InVenture

What areas in the agricultural sector are priorities for investors in the current environment and why?

In the context of the progression of COVID-19 on a global scale and in Ukraine, as well as some subsidence in prices for agricultural products, the agricultural sector of Ukraine remains in the focus of both domestic and international investors. Traditionally, in Ukraine, the largest number of M&A transactions and investments in the re-equipment of fixed assets takes place in the field of crop production companies for growing grain and oil crops. Since the beginning of the year, we have heard a lot of statements from agricultural companies about the allocation of additional investments for the construction of elevators, processing facilities or the purchase of new agricultural equipment.

Since the beginning of the year, we have already seen several small M&A transactions involving Western Bug, UIFK Agro, SAS Investcompagnie and others. Among the large ones, it is worth highlighting the takeover of the northern part of the Svarog West Group agricultural holding by Epicenter K. By the end of the year, several more large transactions are expected to be closed, which are currently under preparation. Investment activity in the agricultural sector is explained primarily by the consolidation of some market players and the corresponding expansion or optimization of the land bank of agricultural holdings, as well as the entry of new investors into the market.

How do investors prioritize investing in a particular industry? What are the criteria? Why do they decide to invest?

The main principle is the return on invested capital, the resilience of the business to risks in agriculture, as well as the projected growth in capitalization and, in particular, the expectation of the possibility of buying out and increasing the value of land. Consequently, investors are more focused on quick payback and good yields in the crop sector. The livestock sector, crop processing, logistics, niche areas in the agricultural sector find relatively less demand among investors.

What can the government of our country do to attract foreign investors? (reforms, adoption of bills, something else?) Why is it important?

I consider the introduction of a number of initiatives to protect the rights of investors to be a priority, which will make it possible to show quick results of reforms. Also important for many investors is the simplification of conditions for new construction and reconstruction of industrial facilities, as well as access to communications. Do not forget that many foreign investors remain in anticipation of further liberalization of the land market.

Why investors may be interested in the Ukrainian agricultural sector? What are our advantages?

First of all, Ukraine has an important competitive advantage in many agricultural positions – this is a low cost of production. The majority of agricultural goods are export-oriented, and currency risks are leveled accordingly. The proximity of the territorial location to key markets has a positive effect on logistics costs. In the agricultural sector of Ukraine, a large number of unrealized opportunities are still available to increase productivity and, accordingly, business profitability.