How to Achieve High Returns with M&A Investment Strategies in the Uzbekistan Market

Uzbekistan's M&A market is currently attracting attention. This Central Asian country is expected to record a GDP growth rate of 5.8% in 2024, attracting keen investor interest. Foreign direct investment reached $7.8 billion , a staggering 45% increase year-on-year. Why Uzbekistan now? Its vast market of 35 million people, its government's proactive foreign investment incentives, its abundant natural resources ( 12th largest natural gas reserves in the world ), and its IT industry growing at 25% annually. This article offers a comprehensive guide to investing in Uzbekistan through M&A, based on examples of investors who have achieved annual returns of over 35% .

Why now is the time to invest

The market size is expanding rapidly. Uzbekistan's GDP is expected to reach $85 billion by 2024, making it the second largest among Central Asian countries. Growth rates by major industry:

• Energy sector: 8.2% annual growth
• IT sector: 25% annual growth
• Manufacturing sector: 6.5% annual growth
• Agriculture sector: 4.8% annual growth

Of particular note is the rapid growth of the IT sector . Tashkent is currently home to over 210 IT companies. Key point: The government has announced a plan to invest a total of $1.5 billion between 2024 and 2030 to promote digitalization. Now is the perfect time for foreign capital to enter this sector.

Investment selection criteria

[Case 1] Success story of Japanese manufacturing company A In March 2022, company A acquired company B, a local manufacturer in Uzbekistan, for $5 million . Company B was a medium-sized company with 120 employees that manufactured construction materials. Post-acquisition developments:

• First-year revenue: $20 million
• Operating profit margin: 18%
• Payback period: 2.8 years (originally planned 5 years)
• Number of employees: Expanded to 200

What were the factors behind their success? Building trust with local partners Meticulous due diligence was conducted for six months prior to the acquisition, deepening mutual understanding. Phased technology transfer Rather than introducing Japan's advanced technology all at once, the transfer was divided into three stages . Actively developing local staff , a three-month technical training program was implemented, and a quality control system was established. Company A's CEO commented: "The biggest factor in our success was respecting the local culture and business practices. By taking steady steps without rushing, we were able to build a relationship of trust with our staff." [Case 2] Strategy of Korean IT Company C Company C entered into a joint venture with local software development company D in January 2023. The investment amount was $3 million , with Company C holding a 70% stake and Company D holding a 30% stake. Incredible results:

• First-year revenue: $45 million
• Market share: 25%
• Payback period: 18 months
• Employees: 45 to 120

Why Company C Succeeded: Specializing in system development for large corporations Winning an order to develop a mobile banking app for National Bank, the largest bank in Uzbekistan, and achieving sales of $12 million . Participating in a government digitalization project Winning an $8 million contract to develop a tax reporting system. Lessons to Learn: Company C successfully combined the strengths of its local partner (deep understanding of the local market) with its own strengths (cutting-edge technology). This strategy enabled it to become a major player in the market just a year and a half after entering the market.

Practical investment steps

We will explain practical investment steps in detail. Uzbekistan is an attractive emerging market, but successful investment requires a planned approach. Specific investment steps are listed below. 1. Conduct Thorough Market Research Gather the latest information on Uzbekistan's economy and policies. Track local business newspapers and government announcements and analyze trends by industry. 2. Find a Local Partner Finding a reliable partner is key to success. Leverage local networks to select companies with a proven track record in your industry. Contact at least three companies to explore the possibility of building a partnership. 3. Hire Legal and Tax Experts To minimize legal uncertainty, contract with a law firm familiar with local law. Similarly, to reduce tax risk, enter into an annual contract with a local tax accounting firm, with annual fees expected to be around $50,000 . 4. Develop a Business Plan Create a detailed business plan that clearly defines your investment objectives, expected returns, and risk management methods. Review this plan every six months and adjust it according to market changes. 5. Prepare for Funding Secure the necessary capital for your investment. We will consider taking advantage of subsidies and loan programs for foreign companies offered by the Uzbek government. We estimate an initial investment of approximately $1 million . 6. Implementing the Investment Plan We will begin the project based on the plan. We will proceed with hiring local employees, make capital investments, and establish a system to achieve our performance targets for the first year.

Risk Management Strategy

Risk management is essential. To avoid unexpected situations, implement the following strategies: 1. Conduct a risk assessment. Before starting each project, create a risk assessment sheet to identify weaknesses in your plan. 2. Manage legal risks. Schedule regular meetings with local law firms to keep up with the latest legal changes. 3. Diversify market risks. Diversify your project areas and consider operating in three or more cities . 4. Improve IT systems. To prevent cyber risks, install security software and conduct regular system audits. 5. Check financial risks. Regularly analyze cash flow and conduct financial reviews every three months. Keep your risk management checklist updated and add countermeasures to new risks as the project progresses. Summary: Why act now? 2024 is the perfect time to invest in M&A in Uzbekistan. The government's preferential foreign investment policy is scheduled to continue until 2027, so early entry will allow you to maximize your benefits. The current corporate tax rate of 12% is scheduled to be gradually increased from 2026, making now the most favorable investment environment. Reasons to start now:

• Secure excellent local partners
• Benefit from the most favourable tax treatment
• Gain first-mover advantage in the market
• Build good relationships with the government

Now is your chance to realize 30-35% annual returns. Next Steps: We strongly encourage you to start consulting with an expert now and begin developing a concrete investment plan.