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M&A Transactions in Times of War

The unprovoked full-scale Russian aggression against Ukraine has had an immediate, profound impact on mergers and acquisitions both domestically and globally. The conflict has caused most potential buyers to put their planned acquisitions on hold or even to entirely abandon their plans due to market uncertainty and other war-related risks. Nevertheless, since the war’s impact is uneven across different economic sectors, with prospective acquirers being able to immensely benefit from discounted offers by local sellers, M&A activity continues even during the conflict.

Consequently, in the context of the ongoing war, it is worth giving careful consideration as to how it can affect each stage of an M&A transaction. In certain circumstances, the war can become a serious deterrent and even render the whole transaction unfeasible due to considerable associated risks, such as when the target company or its assets are located in an occupied territory or close to the frontline or are potential targets of missile strikes. In other cases, the conflict is likely to trigger certain obligations of the parties to a transaction agreement.

Term Sheets

In the context of the war in Ukraine, both buyers and sellers will rather seek to postpone the negotiation and signing of a term sheet, letter of intent, heads of agreement or a memorandum of understanding until the buyer has completed due diligence and the extent of the war’s impact on the target’s business has become evident.

Furthermore, the content of a negotiated term sheet will be somewhat different from what is normally included in such a document and also reflect some pre-closing and closing conditions, especially long-stop dates, and material adverse effect clauses.

Due Diligence

The war has seriously affected the possibility of conducting the full-scope legal due diligence of a target. Due to physical safety issues, primarily in areas close to the frontline and active battlegrounds, as well as the constantly present risk of missile strikes by Russia, most office employees are forced to work remotely. Therefore, using a physical data room does not always appear to be safe and practical. A virtual data room would be the preferred option. In-person management representations and interviews can also be substituted by Zoom meetings or Skype calls. The parties should also adjust their timetables and take into account possible delays in the collection of additional documents.

Furthermore, the conflict is seriously affecting the scope of due diligence. In particular, the expert team might need to investigate specifically how the present situation impacts the target’s business, including such aspects as (i) the risk of physical damage to and destruction of the target’s assets; (ii) employment, in particular, how mobilization is affecting the target’s workforce; (iii) supply chain risks; (iv) legal obligations under key business contracts; (v) forex restrictions, financial and tax liabilities; (vi) contingency arrangements and business continuity plans; (vii) insurance policies and their coverage, (viii) any presence of Russian elements in the shareholding structure as well as connections to sanctioned persons, and properly evaluate all related legal risks.

Finally, the conduct of legal due diligence is severely complicated by the fact that access to the (otherwise publicly accessible) Ukrainian public registers containing material corporate data on legal entities (such as the Unified State Register of Legal Entities, Private Entrepreneurs, and Public Organizations) and information on real estate assets (such as the State Register of Rights to Real Property) is restricted during war time. Only state registrars and notaries included in special lists maintained by the Ministry of Justice of Ukraine have access to the said registers and can, upon request, provide official information therefrom.

Deal structure and Russian element

In the wake of the aggression, Ukraine, the EU and other countries and organizations have imposed severe restrictions and sanctions on Russia as well as businesses owned or controlled by Russia or its citizens/residents.

In particular, Ukraine has prohibited transactions with shares and assets of a target that is incorporated and registered under Ukrainian law whose ultimate beneficiary owner (UBO), participant (shareholder) holding a share of 10% and more is Russia, a Russian citizen, or a legal entity incorporated and registered under Russian law. The mentioned subjects also cannot be purchasers and sellers of shares and assets of Ukrainian companies. Notarization, state registration and otherwise recognition (endorsement) by Ukraine of any respective share and/or asset deals are prohibited.

Beyond that, assets, including shares (corporate rights) in Ukrainian companies within the territory of Ukraine belonging to Russia as a state, its residents and other persons supporting the war of aggression are subject to forcible seizure (expropriation). The respective regulations are mainly applicable to Ukrainian legal entities (their branches, representative offices), a founder, participant, shareholder, and/or UBO of which directly or indirectly (through other legal entities) is Russia or any other persons (individuals and legal entities, both residents and non-residents, regardless of formal affiliation and control), who support the Russian aggression against Ukraine. Any movable and immovable property of the mentioned entities and persons, including funds, bank deposits, securities, corporate rights, and other property (assets) can be seized (expropriated) without any compensation (reimbursement) of its value.

Due to the above, a due diligence team should pay special attention to discovering a “Russian element” in the target’s shareholding structure. The presence of a Russian direct shareholder and/or UBO will be an immediate deal breaker effectively preventing a potential share or asset deal under Ukrainian law. Even if the target does not have any direct Russian shareholders or UBOs, a Russian shareholding on the grandparent and other intermediate levels of the shareholding structure will be frowned upon by Ukrainian authorities and may lead to potential issues in the future. Therefore, a prospective acquirer should apply a careful approach to selecting a local target, analyzing its shareholding structure and structuring the deal to avoid any involvement of a Russian element.


Besides the shareholding structure, other potential deal breakers in the present context could be the target’s being subject to or having connections to persons and entities currently under sanctions imposed by Ukraine, the EU and other countries and organizations in response to the Russian aggression. Such connections could be maintained through the target’s shareholding structure, UBOs, as well as its supply chain and customers. E.g., a prospective buyer should consider declining a deal if the target’s major suppliers or customers are sanctioned entities, including those located in Russia or Belorussia. And part of the target’s legal due diligence should be reviewing the existing sanctions lists to establish any potential deal breakers.

Forex restrictions

While structuring an M&A deal, the parties should consider the general moratorium imposed by the Ukrainian government on the performance through Ukrainian bank accounts of payment obligations whose payers and/or beneficiaries are Russia or Belorussia; Russian or Belorussian citizens (residents); legal entities incorporated and registered under Russian/Belorussian law; and legal entities incorporated and registered under Ukrainian law whose UBOs, shareholders holding a share of 10% and more are Russia/Belorussia, a Russian/Belorussian citizen (resident), or a legal entity incorporated and registered under Russian/Belorussian law. Thus, under a contemplated M&A deal, payments should be structured in a way that excludes any of the above-mentioned subjects/entities/persons as payers or beneficiaries.

Signing the Agreement

The execution of a transaction may be complicated since the simultaneous presence of all the parties involved from different jurisdictions at one place, and notarization might appear problematic due to travel restrictions for Ukrainian male citizens applicable under martial law. Thus, the parties should, ahead of time, envisage specific arrangements for the signing, exchange of counterparts and coming into force of their agreement.

Notarizations and Registrations

It should also be kept in mind that under martial law, only state registrars and notaries included in special lists maintained by the Ministry of Justice of Ukraine may perform registration / notarization actions (including those related to share deals / M&A) regarding legal entities and real estate rights. At the same time, for certain notaries the list may explicitly provide prohibitions to notarize share and/or real estate deals. Thus, the parties to a deal should verify whether a particular notary is included in the list and any such restriction is provided there.

Further, notarization of most legal transactions (including share transfers and real estate transactions) on request of a person related to Russia is prohibited. I.e., a Ukrainian notary will refuse to notarize a deal (transaction) whose party (signatory) is a Russian citizen, legal entity incorporated and existing under Russian law, as well as a Ukrainian legal entity whose UBO, participant (shareholder) holding a share of 10% and more is Russia, a Russian citizen, or a legal entity incorporated and registered under Russian law. Thus, most of the actions in order to change the composition of the target`s participants related to Russia cannot be currently completed.

Regulatory Approvals

The ongoing war and restrictive measures imposed by the Ukrainian government to address the existing situation have significantly affected the normal working routines of regulatory bodies and increased the time required to procure regulatory approvals for an M&A deal, such as antitrust clearance from the Antimonopoly Committee or approvals issued by the National Bank of Ukraine. This should be duly taken into account as a factor affecting the completion of a transaction.

For the duration of martial law, numerous statutory application deadlines and time limits for providing certain public services, including the issuance of regulatory approvals, have been suspended. The duration of these deadlines and terms will be restored when martial law is lifted.

Specific Deal Terms

The war and related issues should be sufficiently addressed in the transaction agreement in order to minimize associated risks.

In particular, the parties should consider including in the agreement adequate provisions on how the target’s business will be functioning under abnormal war conditions and how the parties intend to coordinate their actions during the period between signing and completion. It is essential that the seller and target be able to make crucial decisions to address crisis situations in a timely and effective manner whenever the buyer’s consent is required.

Another key consideration is ensuring that representations and warranties provided in the agreement adequately cover all potential implications of the war related to the target’s operation and the obligations of the parties. Regarding already executed agreements, the parties should carefully analyze whether all provided representations and warranties still hold true in the circumstances of the conflict and whether any liability issues arise.

The parties should also thoroughly take into consideration whether wars and other military conflicts, and the resulting public restrictive measures, will be viewed and/or included in the agreement as a material adverse change. The latter can give rise to a party’s right to file a lawsuit requesting unilateral termination of the agreement pursuant to the respective provisions of the Civil Code of Ukraine. All relevant elements and circumstances should be taken into account while determining whether a material adverse change clause can apply or be triggered in the event of war or a similar situation and, first and foremost, on the extent of the adverse impact it is having on a party.

Force Majeure

Closely related to a material adverse change, there is the issue of force majeure. This is defined as an extraordinary circumstance outside of a party’s control that, in contrast to a material adverse change, only relieves the affected party from liability for breach of contract attributable to such circumstance. Normally, an agreement may not be terminated due to force majeure unless such option is expressly provided in it.

The Ukrainian Chamber of Industry and Commerce issued an official general statement on its website, attesting that the Russian aggression against Ukraine qualifies as force majeure. Thus, an affected party to an M&A transaction can refer to the fact of the aggression and the mentioned statement as a force majeure event to relieve them from liability for breaches of obligations under the agreement.

However, the abovementioned general statement of the Ukrainian Chamber of Industry and Commerce alone would not be sufficient, and a party referring to Force Majeure still should obtain an individual certificate confirming the war’s impact to its’ particular business.

Transaction Financing

Where a transaction depends on third-party financing, additional challenges need to be taken into account. First of all, the parties may be confronted with a situation of uncertainty with regard to availability of financing and its terms. Apparently, potential lenders will want to increase their fees, add collateral and include additional legal safeguards and conditions to be fulfilled by the target and buyer in order to obtain financing. Moreover, the probability is high that a provider of financing will refuse to finance a particular transaction with due consideration of potential risks that the war poses for the target’s and buyer’s business.

In such a situation, it is important for the agreement to provide sufficient flexibility of the buyer to walk away from the deal if financing becomes unavailable. Otherwise, the buyer (borrower) should have adequate contractual mechanisms in place to prevent the lender from refusing to provide financing where the buyer is forced to close the transaction. The seller might, in turn, seek to include in the agreement higher break-up fees for a buyer who fails to obtain financing and close the deal.


Overall, the Russian aggression against Ukraine is having a serious adverse impact on M&A. In these circumstances, the parties are advised to carefully consider all war-related aspects when planning and implementing a transaction in order to adequately address, limit or allocate relevant risks. In certain cases, it might even appear reasonable to reconsider the practicability of a transaction, to re-negotiate or postpone it until the war is over and associated restrictive measures are lifted. At the same time, the impending post-war reconstruction of Ukraine is likely to open up immense investment opportunities for existing and potential foreign investors, which will undoubtedly provide positive perspectives for future M&A deals.


Also, you can read the article here: Ukrainian Law Firms. A Handbook for Foreign Clients. (click on the blue text).

This publication is for informational purposes only. If you would like to learn more or seek legal advice, please contact one of the following or your usual Nobles contact:

Alexander Weigelt (Partner), Denys Vergeles (Counsel), Daria Chupryna (Associate).



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