“Generally, the Bulgarian economy is on an upward path, so law firms are busy,” reports Kinstellar Bulgaria Managing Partner Diana Dimova, who describes increased M&A activity, a strong demand for regulatory advice, and significant public sector opportunities.
Dimova says that the outlook, in terms of deal activity, is positive, with Real Estate, Banking, and TMT among the most active sectors in the country. “In terms of M&A, a number of sizable transactions have been completed in the last few months, and there are more in the pipeline,” she says. “The main drivers of M&A are the exits of Greek banks from Bulgaria, as well as the appetite of new investors to establish themselves on the market." She adds that the abundance of current M&A activities, especially in the real estate sector, reminds her of 2007 — the last year the country’s real estate market experienced similar growth. “This sector is generating remarkable volumes of investment in the country, and I think the trend will continue, especially in retail and office buildings.”
Dimova says that most of the buyers are foreign investors, including a number of South African funds interested in buying shopping malls and large office developments.
It’s not only M&A work that’s keeping lawyers busy, and Dimova suggests that, “it is important to acknowledge the big demand for regulatory advice as well.” According to her, “in addition to the GDPR we also see an increase in matters related to financial regulations, cyber security, and compliance.”
Another initiative that has boosted the Bulgaria business market is the One Belt, One Road strategy proposed by the Chinese government that focuses on connectivity and cooperation between Eurasian countries. “Due to this initiative,” Dimova says, “we are also seeing a greater interest from Chinese investors. For example, the HNA Airport Group was awarded a 35-year concession to run the airport in Plovdiv, Bulgaria's second-largest city. I am sure that more Chinese investments are expected in others sectors as well, like infrastructure, real estate, energy, and TMT.”
There are more interesting opportunities in the public sector, Dimova reports. “This includes the long-awaited concession of Sofia airport, but also several infrastructure projects in the gas sector that have generated interest from international players. We expect increased scrutiny from the business community to ensure that public tenders are run at the highest international standards.”
Dimova says that the most substantial legislative amendments that are expected in the near future are related to the renewable energy industry. “The purpose of the upcoming amendments is to further liberalize the energy market,” she says. “They will basically replace the current feed-in tariff contract model with a contract for compensation with a premium model. This will require renewable producers to restructure their business activities, including possibly renegotiating their existing finance agreements,” she explains. Still, she admits to some personal reservations about the measures. “Changes to the Energy Act would make revenues of the renewable energy producers less predictable,” she says, and she concedes that, “this development will likely require strong legal support.”
Staying with the energy sector, Dimova says that Bulgarian businesses are also expecting the Clean Energy for All Europeans package to be adopted, which contains measures designed to provide a stable legislative framework necessary to facilitate the transition to clean energy. “This package will provide new opportunities not only for energy stakeholders, but also for other stakeholders like financial institutions and IT companies."