Hristov & Partners Partners Pavel Hristov and Dragomir Stefanov talk about M&A in Bulgaria in 2025.
CEELM: What would be your bet at this start of the year – will 2025 see more, fewer, or the same level of activity in terms of M&As in Bulgaria?
Hristov: 2025 will likely be very different. As an open market economy, Bulgaria will be exposed to various external negative influences (unprecedented turbulence in geopolitics and global and EU economy) but also internal challenges (budget deficit, inflation, and a drop in FDI). There will be more political and economic uncertainty and instability than usual.
We have coped with crises and difficult times, even hyperinflation, in Bulgaria before. We can safely assume that M&A activity will remain at the same level or slightly lower in terms of volume. Several larger cross-border deals, such as Russia’s Lukoil exit from its oil refinery and retail gas stations and e& PPF Telecom’s potential buyout of United Group’s Bulgarian businesses, if successfully closed, may result in a higher total deal value year to year.
CEELM: What do you believe will be the main elements determining the results at the end of the year?
Hristov: Several industries will continue to outperform the overall economy and will generate the majority of the deals: technology, energy, and industrials, in particular manufacturing and production. 2024 was a difficult year for export-oriented industries. Many customers reduced or canceled their purchase orders. Consequently, the 2024 financial results of many fast-growing Bulgarian suppliers suffered. They had very optimistic expectations and financial projections in 2023-24, but the reality of the actual results was sobering. This will help set more reasonable sellers’ expectations and bridge the valuation gap that persisted in 2024. More sellers will adjust their valuations and price tags and this will facilitate the completion of more deals in 2025.
We also expect more PE and VC deals and funding rounds. Bulgaria has been overlooked in the last couple of decades compared with our neighbors, but we see increased and growing interest in some major global and regional PE and VC funds.
CEELM: Are there any pieces of legislation on the horizon that you are keeping an eye on as potentially impacting the M&A market in 2025?
Stefanov: Bulgaria is finalizing the implementation of its FDI screening regime and we expect it to be fully operational in the second half of 2025. At the end of January, the Rules of Procedure for the FDI Screening Council were adopted. The next key step is the approval of amendments to the Rules of Implementation of the Investments Promotion Act, which will outline the procedures for submitting and processing FDI applications, clarify the allocation of responsibilities among the administrative bodies involved in the screening, and establish the criteria for electing council members. However, the current legal framework raises challenges regarding transparency and predictability, as there will be limited access to documents related to the council’s activities. Coupled with restricted access to the council’s minutes, correspondence, members, secretariat staff, and experts, this will likely complicate external understanding of the criteria and timelines governing the decision-making process.
CEELM: Who do you expect to be the main buyers in Bulgaria in 2025?
Hristov: We expect mostly financial buyers, PEs, and VCs in the non-regulated sectors, and strategic buyers in the regulated industries like energy, telecoms, and media but also in industrials/manufacturing.
CEELM: What do you expect will be the most attractive targets in Bulgaria in 2025, and what will make them so?
Hristov: Tech start-ups and scale-ups – in areas such as gaming, fintech, e-commerce, enterprise software, mobility, and professional services. Renewable energy and logistics companies will continue to consolidate.
Stefanov: Deal-making in Bulgaria’s commercial real estate sector was strong in 2024, with transaction volumes reportedly exceeding EUR 360 million, driven by active investment in office spaces and retail properties. Looking ahead to 2025, the momentum is expected to continue, with the completion of over 100,000 square meters of new retail park space further fueling the market.
Hristov: As always, the most attractive targets will be those that have global or international and scalable business models, the best of class products or services and exceptional teams, have credible growth perspectives, and have won a sustainable book of business or even a solid market share in the most lucrative foreign markets: the US, major EU markets, the UK, Canada, Japan or China. We confidently believe that there are at least a handful of such businesses in Bulgaria and are prepared to act on those deals when they materialize.
This article was originally published in Issue 12.1 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
