Private Equity Targeting Ukrainian Farms


May 7, 2015

The Ukrainian crisis has long troubled the world’s market and private equity activity has slowed down, especially in Russia, as a result. But it looks like Ukrainian farms might emerge from the troubles as winners, as private equity firms are going after them as a lucrative investment opportunity. But the conflict continues to cast a shadow over the region, especially in terms of Russian private equity investment.


Bloomberg’s Report
Bloomberg wrote about the increasing interest on Wednesday. The newspaper cited Michael Bleyze, a director of a private equity firm SigmaBleyzer, who told the news agency that his firm is actively seeking new deals in the country. The firm owns AgroGenerations, a company that manages fields of wheat, sunflowers and other crops across Ukraine, and which is currently in the process of expanding its farm operations.


“We’ll need more arable land to be used in the world and from that point of view Ukraine by far and away has the highest potential,” Bleyzer told. His private equity firm has so far invested around $1 billion in Eastern Europe during its 20 years of operation.


Lucrative Farm Opportunities
The country has 32 million hectares of land available for crops; Ukrainian agriculture companies could expand quickly and benefit from the rising food prices. But according to UN’s Food and Agriculture Organisation, the fall in global food prices has continued in the past year, with the exception of only one month. Nonetheless, some food crops have been doing a lot better, something Bleyzer acknowledged as well.


He told Bloomberg that the agriculture company is planning to shift towards the more profitable sunflower growing and cut down corn cultivation. Bleyzer also told in the interview that the harsh economic conditions have created opportunities in the country for private equity investors.


Ukraine’s Troubled Situation
The conflict in Ukraine has badly damaged the country. The country is facing a second year of recession and banks have restricted lending. The difficulties in financing businesses have greatly helped private equity firms to enter the country and find attractive new investments. In April, the central bank in Ukraine increased the interest rates to 30% in an effort to stop the plummeting hryvnia from spiralling down any further.


Major private equity firms have also taken a cautious approach to the region amidst the conflict. The Financial Times reported last year how DMC Partners abandoned their fundraising efforts targeting Russian deals after the conflict escalated.


Furthermore, Preqin reported on the PE situation in Russia at the end of 2014 and noted that firms are lacking confidence in the region. The company’s data showed that 193 firms had included Russia as a part of their investment remit, and there is still plenty of capital sitting in some of the Russia-focused funds as well.


Although the western sanctions make it harder to conduct private equity deals in Russia, it might open up more opportunities for Ukrainian businesses to attract this investment instead. It remains to be seen whether big private equity firms become interested in the Ukrainian markets in the coming months.


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