Many technological companies, an energy giant, a communications major, a few financial entities and several manufacturers - this is what the M&A market in Bulgaria looked like in 2022. After the pandemic-induced slowdown in 2020 and the recovery in 2021, the market last year continued to gain speed. But the war in Ukraine and the resulting trade disruptions, energy insecurity and surging inflation made investors cautious. Last year saw the completion of the acquisition of Raiffeisenbank Bulgaria by KBC in a deal exceeding 1 billion euro. The merger with KBC's United Bulgarian Bank is now a matter of months.
Bulsatcom, the telecommunications firm, also finally found a buyer. Its acquisition by Bulgarian investor Spas Rusev ranks among the three biggest deals in 2022. The other two large assets to change hands were ContourGlobal Maritsa Iztok 2 thermal power plant and BNP Paribas Personal Finance.
The Capital Weekly's M&A list shows there were about 60 deals in 2022, a figure similar to that in 2021. This time however the list does not include the business property transactions, which would otherwise raise the number to 70 or 80, i.e. the pre-pandemic level.
Back to normal - for now
Market representatives also report higher M&A activity but say it was coupled with wariness on behalf of investors due to the complex situation.
"In 2021 and 2022, there were more deals to compensate for the COVID freeze. Since last fall buyers have become more reluctant because of the higher interest rates. Venture capital funds, for instance, have become much more selective. But there is not a dramatic slump," Diana Nikolaeva, partner heading the Strategy and Transactions offering in EY Bulgaria, North Macedonia, Albania and Kosovo, said.
"After an unusually active 2021, the M&A market normalized in 2022. There is a downward trend but deals remain above the pre-pandemic levels," Ilko Stoyanov, partner at the Sofia office of Schoenherr law firm, commented.
"I would say the M&A market was weaker in 2022 than in 2021, when - besides a similar level of activity - we saw the completion of many investment decisions taken during the pandemic," said Yulian Gikov, CEO M&A Southeast Europe at Raiffeisen Bank International.
The director of Bulgarian consultancy Entrea Capital Dimitar Uzunov pointed out that some deals were postponed or canceled due to the uncertain geopolitical and economic environment. But he also noted an upside: "Many of the deals (about 60%) were made by foreign strategic investors, which is a good sign that Bulgaria remains an attractive investment destination despite the continuing political insecurity."
The big ones
The largest acquisition of a Bulgarian asset was an international deal. ContourGlobal, majority owner of Bulgaria's second largest thermal power plant, announced last spring it had reached an agreement to sell its business to Kohlberg Kravis Roberts (KKR) for a touch above 2 billion euro. With installed capacity of 908 megawatts, the ContourGlobal Maritsa East 3 coal-fired power plant contributes about a third of the parent company's revenue, which amounted to $2.15 billion in 2021. ContourGlobal holds 73% of the plant's equity, the remainder is owned by Bulgaria's state-owned National Electric Company.
After several years of looking for a new owner, the shareholders of Bulgaria's biggest pay TV services provider Bulsatcom finally reached a deal. Spas Rusev's offer, which valued the operator at more than 120 million euro, was accepted in 2021 but the transaction took more than a year to be finalized.
The largest bank deal in Bulgaria's history was completed in 2022, when Belgium-based KBC acquired the local subsidiary of Austria's Raiffeisen Bank International. In yet another step towards the consolidation of the banking sector, at the end of last year Postbank, a subsidiary of Greece's Eurobank EFG, announced it would acquire BNP Paribas Personal Finance, the French bank's consumer lending unit.
After acquiring the Bulgarian business of Czech energy group CEZ in 2021 by purchasing majority packages in CEZ Distribution and CEZ Electro, in September Eurohold acquired full control of the two businesses through a series of deals on the stock exchange in Sofia and unveiled plans to delist them.
A major withdrawal of a foreign investor was that of France's Renault Group. The import and distribution of the Renault and Dacia brands in Bulgaria were taken over by Switzerland-based Emil Frey Group and those of Nissan by Israel's Taavura Holding.
Plovdiv-based e-bike manufacturer Leader-96 changed its majority owner after TRG EEF, a fund of U.S.-based The Rohatyn Group, acquired the equity stake held by Finland's KJK Sport. The Domuschiev brothers attracted the 3SIIF investment fund of the Three Seas initiative as a minority partner in BMF Port Burgas, the holder of the Burgas port concession. According to market sources, the two deals value each of the companies at about 100 million euro.