M&A Market 2023 and Potential Trends 2024 — analysis of Ukraine and the World

In 2023, the Ukrainian M&A market showed impressive growth, reaching $1.4 billion, which
significantly exceeded previous figures. More than 250 million dollars fall on the IT industry. The analysis of the markets is conducted by Mergewave Capital, which the company shared with AIN.Capital. We are publishing the unabridged version of the report.

The number of M&A deals also increased significantly, reaching 87 deals compared to 54 in 2022 and 120 in 2021, according to InVenture research. Particular emphasis should be placed on increasing activity in such sectors as IT, commercial real estate, industrial logistics and agriculture. It is worth noting that among the 87 completed deals in the IT sector, Mergewave Capital played an important role, having completed 4 successful deals with IT outsourcing companies, and another deal is being finalized in 2024 in the field of IT products.

In this context, our goal is to analyse in detail the events of the past year 2023 and forecast the development of the situation in 2024 in the M&A market in the technology sector, focusing in particular on IT services and products. In addition, we direct our attention to the study of Ukrainian manufacturers in the field of the defense industry, revealing potential opportunities and challenges for this promising segment.

ІТ Services

According to a study by the AIN media group (Fig. 1), the number of IT specialists in Ukraine continues to grow, reaching approximately 350,000 (as of January 2023).

At the beginning of 2024, we also predict roughly the same number with an increase of 5-15%, but during this year a lot happened on the front, and accordingly we see an unconfirmed dynamics of migration of IT specialists from private IT companies to the sphere of defense industry of Ukraine and Armed Forces of Ukraine. This can be seen not only in (Work.ua, Rabota.ua, etc.), but also in the relevant professional service for finding a job in the defense sector (Lobby X).

Fig. 1 Source: AIN.Capital

The report also states that in 2022 and 2023, according to AIN.Capital data, there was a significant decrease in both the number of M&A deals (Fig. 2) and the volume of transactions (Fig. 3).

Number of M&A deals

Fig. 2 Source: AIN.Capital

Volumes (value) of M&A deals
Fig. 3 Source: AIN.Capital

However, the volume ($M) in 2023 showed a higher value in 2023 – ($130M) vs. the one ($111.1M) in 2022. This indicates positive dynamics in the M&A market in the technology industries, as small companies cannot withstand stiff competition and many owners want to to capitalize on a service business in which they have invested their time and expertise, but are currently unable to compete in the market with larger players and are having trouble selling their services, so they are looking to sell part or all of the business to a larger company that will keep jobs and provide momentum moving forward with new markets, new industries. Globalization and de-risking – In most cases, the main goal of larger companies is to buy smaller ones.

However, if we look at the types of deals in 2021-2023 for the financing of IT companies in Ukraine, a strange situation emerges (Fig. 4): the largest number of deals are grant funds and early-stage venture investments (mostly product startups). This suggests that the owners of IT companies are looking for quick money in a minimum period of time and therefore quick merger/acquisition deals will be mainstream in 2024-2025.

Other market players also note that Small ball deals are prerogative: “According to the firm’s M&A analysis, the volume of large deals (over $1 billion) has continued to decline steadily since 2020 as deal participants increasingly target smaller mid-market transactions that are easier to execute, less risky to finance and offer a unique and strategic fit into the buyer’s portfolio.”

Fig. 4 Source: AIN.Capital

According to Forbes and the service that formed M&A deals in 2023, we have several cases publicly mentioned in these media, 4 of which went through the company Mergewave Capital. As a result, the Ukrainian IT market increased by 1 Polish giant — the EUVIC group of companies, and, as standard for the market, by the minority investment of the Ukrainian InSoft group.

As the M&A investment advisor of Euvic Group in Ukraine — Taras Bachynskyi — notes:

This is not the only foreign strategic partner that works during the war in Ukraine. We are constantly negotiating and convincing to invest in Ukraine. And as we know, there are also other non-public Tech deals from foreign investors that didn’t catch the eye of Forbes, AIN, and DOU, but overall, 2023 was pretty stingy with the M&A.

I expect that there will be more deals in 2024: firstly, Euvic, the company we represent, is planning a few more deals. Secondly, we are also constantly working with European players and they also understand that IT companies are not static assets, and yes, in most Ukrainian companies, 30-40 percent are already abroad. Therefore, it is not such a risky investment. We also know several companies that are looking for discounted assets — IT outsourcing companies at 3-4 EBIT. Considering a rather difficult year for IT, we expect the volume of deals to at least double, as partnering with a stronger IT company, selling them a stake in our business and moving on is quite a smart decision.

Based on this, we can conclude that there will be more M&A deals in 2024, since 2023 seemed to be a difficult year for IT companies, accordingly, business founders are faced with the question of survival and capitalization:

  • selling the company when it has passed the peak, thus capitalizing all its resources built up over the years;
  • or merge with a larger strategic partner in order to stay afloat and survive the turbulent period, thus keeping employees and own business with the opportunity to grow together with the big giants of the international market.

As Pavlo Karapinka, co-founder of Mergewave Capital, notes – “Buyers often become large foreign companies that see the potential of the Ukrainian market and want to hire the best personnel in the field of software development. This is a buyer’s market, so you should listen and feel their mood with your fingertips and set up business sellers for a positive deal with the maximum possible capitalization of their work. We need to move forward with stronger players. In the future, everything can change, and there will be an opportunity to buy back your shares, if necessary.”

ІТ Products 

As Vitaly Dnistrovskyi, investment director of the product M&A vertical of Mergewave Capital, notes:

Unlike the outsourcing market, the product market is dominated by VC and Private Equity investment rounds. In 2023, there were about 40 such deals with Ukrainian companies or companies of Ukrainian origin for a total amount of about 200 million dollars. Among the most iconic deals are the $70 million Series C of edtech platform Preply, the $22 million investment round of Fintech Farm, and the $15 million Series A of digital clothing marketplace Dress X. In 2024, we expect further rounds from existing investors and attracting investors at a later stage.

In terms of product deals at Mergewave Capital, in 2023 we had the most activity in the b2b SaaS segment. This applies both to Ukraine and abroad. In Ukraine, this segment is still not very active from the point of view of M&A, because the most active investors consider M&A profiles starting from $1M ARR, and the Ukrainian food b2b market still remains not so large compared to the European one. However, given the significantly higher capitalization of fixed income models compared to the same outsourcing companies and continued moderate interest from some major players in Eastern Europe, 2024 will be a positive trend.

We are currently in several advanced stage negotiations for several vertical SaaS solutions. We also observe the interest of investors in fintech solutions (classic payment transaction models, e-commerce payment solutions, SaaS solutions for financial institutions, neo-banking models)

The most active M&A investors in the European segment of b2b software for companies up to $10M ARR on average pay multipliers of 3-4x ARR, depending on the vertical, growth rate, and marginality of the project. Of course, the “martial law” discount will be applied to Ukrainian projects with clients in Ukraine, but we hope that at least with the localization of military actions, as well as a favorable global macroeconomic climate (such as, for example, the expected decrease in interest rates), in 2024 we will observe more positive dynamics,

Vitaliy Dnistrovskyi notes.

In fig. 5 we can see the global picture of product SaaS deals in M&A in the world, respectively, the year 2023 is similar to 2018 in terms of the volume of deals, and from here we also see a potential increase, if not in the value of deals (on average $1-5M), then in the number of such deals.

Fig. 5 Source: Aventis Advisors

Defense tech

As our colleagues from INTEGRITES point out, now defense technologies are experiencing an unprecedented boom. Indeed, many IT specialists directed their efforts to the development of defense projects. For example, startups that before the war developed software to control drones for peaceful purposes, such as delivering goods or aerating fields, have switched to using drones for military purposes.

As a result, a number of defense technology companies have reached the next level of development in other specializations, including aviation equipment of various types and purposes, technologies for combating drones, robotic systems and software complexes aimed at the operation of the above mechanisms.

In turn, as Stepan Jus, Global M&A Operational Officer and head of the Defense vertical at Mergewave Capital, stated:

We are following this direction and have already opened it for potential fundraising and M&A deals. In this way, we invite Ukrainian manufacturers to our portfolio to attract buyers/investors to our Military Tech startups and manufacturing enterprises, in order to act as a common front against the occupying forces of the Russian aggressor. At the moment, there are a dozen private companies that are looking for financing opportunities in the field of the defense-industrial complex, and investors see the future of Ukraine in the support of the national military industry and the state production of defense products.

It is also worth noting that, in addition to the short-term supply of military equipment, in the long term, Ukraine will need help in restoring its own defense industry and reorienting production to Western standards. Therefore, according to the Rheinmetall company, in October 2023, the concern established a joint venture in Kyiv with the Ukrainian state company Ukroboronprom JSC — Rheinmetall Ukrainian Defense Industry LLC. As a first step, the repair and maintenance of combat vehicles is planned, and then the production of armored vehicles in Ukraine. The goal is to turn Ukraine into an effective partner, restore its once powerful defense sector and ensure its strategic autonomy. Currently, investments in the Ukrainian defense industry are being counted not only from other countries, but also from the private defense sector and private investors.


Summing up, we can say that 2024 will be much more interesting in terms of the number and value of deals, since many deals have been postponed from 2023, and last year’s results are not satisfactory enough for many domestic IT companies, accordingly, we will see a trend of minority and majority share sales.

Almost 50% of buyers are ready to buy 100% of smaller companies that have efficient employees, contracts and customers. However, there are risks for men in Ukraine associated with mobilization. There is also an unconfirmed trend of the transition of IT specialists from private companies to the sphere of the defense-industrial complex and the Armed Forces of Ukraine, accordingly, the IT sector is gradually moving from the private sector to the defense sector, in which we will also see the start of deals already in 2024.

2024 is predicted to see an increase in the number of M&A deals due to the difficulties experienced by many IT companies in 2023. Specialists will make deals to capitalize on resources, preserve jobs, and survive in a competitive market.

In general, M&A agreements are a strategic tool for firms that seek not only to survive, but also to develop in the face of growing competition. As for the product direction, the results indicate the dynamic development of the Ukrainian M&A market in 2023. Investment rounds from VC and Private Equity dominate, bringing together companies with Ukrainian roots and global players. In 2023, there were about 40 such deals worth approximately $200 million.

The forecast for 2024 indicates continued activity among both current investors and new players, particularly in the b2b SaaS segment. However, it is worth noting that the Ukrainian food b2b market remains less dynamic compared to the European one, but retains the potential for growth, especially in connection with the increased capitalization of recurring revenue models. Ukrainian projects are subject to a certain “martial law” discount, but with the localization of military actions and a favorable global economic climate, positive dynamics on the M&A market are expected in 2024. The increase in the number of deals and the interest of investors in Ukrainian technology companies indicates the perspective of the market and its readiness to interact with international players.