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Editorial

Ukrainian M&A Market: Legal Viewpoint

OLEH MALSKYY, PARTNER, ASTAPOVLAWYERS INTERNATIONAL LAW GROUP:

The assessment of risks in M&A transaction in Ukraine may turn out to be diffi cult due to many country-specifi c risks, as well as some hidden commercial/ political risks. 

The role of a good lawyer is to provide the client with suffi cient background information to make an educated assessment of such risks. The country’s inherent risks would include lots of minor irregularities and violations that may lead to imposition of fi nes. If viewed in a very conservative way any such risk may be seen as substantial and theoretically may lead to a bigger trouble.
However, in practice, it is not always the case, and such risks may turn to be immaterial. One should not overlegalise such risks, but look into their practical implication and the history of application. The latest state policy is to deregulate the business and shorten the list of required licenses and permits.
More serious risks are those of commercial and even political nature, to unveil which in-depth commercial intelligence is required. Many businesses are, in one way or another, related to politically exposed persons or silent partners, which may become a serious post-acquisition issue. Understanding the reality and the rules of the game is important. Representations and warranties transactional documents prepared under the English law may be of no use in practice.
When assessing the risks, it should be taken into account that many things contrary to logic may be possible, and that the general three-year statutory limitation period may not always work as the best security blanket. Rumour has it that a case was reopened recently relating to 10-year old acquisition of a land plot, on which a commercial building has already been built and is currently in operation.
Usually, post acquisition measures should be applied to mitigate any hidden historical risks that may have been acquired together with the target or asset. Despite the additional cost that may arise, such post acquisition restructurings have always become helpful in a defence strategy should the need for it arise.

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This article was first published in Eastern Europe and central Asia World Finace Review


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