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M&A In Bulgaria – Trends And Legal Environment

By Vladimir Penkov & Svetlin Adrianov
Posted: 10th June 2016 09:16
After the record levels of the Bulgarian M&A achieved in 2007 and 2008 there was a steep fall of the M7A transaction both in number and in volume to get in 2010 to about six times less than 2008. Unfortunately, after a feeble revival in 2010 there is a stable trend of decrease ever since, whereas in 2015 the number of transactions was even less than 2010 (50 compared to 80) and the volume (about EUR 850 million) is only slightly higher than 2010.
The focus has recently been mainly in the IT, communications and financial sectors with occasional industrial enterprise and retail commercial properties. This could reasonably be expected to continue in 2016.
There is a very high ratio of “internal transactions” and more than 60% of the transactions on 2015 has been done by locally established investors. The higher value transactions include the acquisition of the tiles producer KAI by the American Mohawk Industries (for reported USD 192.6 million) and the acquisition of the local cable TV and internet supplier Blizoo by the also local telecom operator Mobiltel, part of Telecom Austria group (EUR 119.7 million), thus continuing the consolidation of the telecom market.
The negative trends of the recent years, however, are not by any means caused by taxation or legal framework. Bulgaria still has a very favourabe taxation system with flat 10% tax rate on corporate profit and personal income and 20% VAT rate, as well as a well-developed system of legal regulations. These positive foundations along with improvement of the investment climate can stimulate and support a change of the trends in a positive direction for the next years, given also the signs of overcoming of the economic crisis and the forecasts of 2-3% of economy growth.
Legal Framework
The legal framework in the country regulating or having impact on M&Atransactionscomprises a number of laws in the corporate, commercial, tax, employment, antitrust spheres of law, as well as in some other legislative acts. The main M&A laws include the Commerce Act, the Public Offering of Securities Act, the Special Purpose Investment Companies Act, the Commercial Register Act, the Protection of Competition Act, the Labour Code, and the Corporate Income Tax Act.
The local practice in cross-border transactions is also largely influenced by the approaches adopted in United Kingdom and United States and has developed standardised sale and purchase agreements accompanied by sets of representations and warranties.
The main law regulating mergers, demergers,splits and spin-off, contributions of assets and liabilities, establishment of companies, etc, is the Commerce Act.Cross-border mergers are not explicitly covered by the local law. Public tender offers and listed companies and transactions in listed companies are regulated by the Public Offering of Securities Act.
The competition aspects of mergers and acquisitions are regulated by the Protection of Competition Act, in effect since 2008. This act is completely harmonised with the basic provisions of the EU competition law in Articles 101 and 102 of the Treaty for the Functioning of the European Union as well as with the regulations concerning the concentration of business activity as a result of mergers and acquisitions, including the cooperation with the European Commission and the national competition authorities of EUMember States, with regard to the application of Council Regulation (EC) No. 1/2003 of 16 December 2002, and Council Regulation (EC) No. 139/2004 of 20 January 2004.
The Public and online accessible Commercial Register by the Registry Agency, working since the beginning of 2008, has already overcome most of the problems, which normally occurred in the beginning of its work in 2008 and has been working properly, within short terms for completing the required filings and minimum deficiencies in the functioning of its database. The Commercial Register provides for free online access to its databases, which significantly facilitates the making of any inquires and checks on the status of a given company and its actual registration data. Thus, at present the registration data and the corporate documents of a chosen targetcompany may be found and analysed quite quickly and easily.
The main source of regulation for public takeovers in Bulgaria is the Public Offering of Securities Act. Presently, after some amendments, the Public Offering of Securities Act creates a comprehensive legal framework that enables public takeovers to be conducted fairly and transparently and that is in compliance with the applicable European Directives which have been duly implemented. The Public Offering of Securities Act also aims at protecting the interests of minority shareholders and contains provisions with respect to takeover bids, mandatory bids, including provisions on pricing and procedure, and requirements in relation to the contents of the offer document.
Merger Control
As mentioned above, competition matters including merger control are regulated by the Competition Protection Act. It requires that the competition authority – Commission for Protection of Competition (CPC) is notified in advance of concentrations if the sum of the total turnovers of all undertakings participating in the concentration on the territory of the Republic of Bulgaria for the previous financial year exceeds BGN 25 million[1], and one of the following criteria is also fulfilled: (i) the turnover of each of at least two of the undertakings participating in the concentration on the territory of The Republic of Bulgaria for the previous financial year exceeds BGN 3 million, or (ii) the turnover of the undertaking which is the object of acquisition on the territory of the Republic of Bulgaria for the previous financial year exceeds BGN 3 million.
The total turnover includes the net sales revenue of an undertaking participating in the concentration for the previous financial year, which equals proceeds from sales of products, goods and services generated by the undertaking's normal business operation, less trade-in allowances, discounts, rebates and value added tax. The turnover shall not include proceeds from sales of products, goods and services between undertakings belonging to the same economic group.
In case the concentration amounts to acquisition of a part or parts of one or more undertakings, regardless of whether such parts are autonomous legal entities, only the turnover related to the part or parts which is the object of the concentration shall be taken into account.
The CPC shall permit a concentration provided that it does not lead to the establishment or reinforcement of a dominant position which would significantly impede effective competition in the relevant market.
The CPC may permit a concentration which, even though establishing or reinforcing a dominant position, is aimed at modernising the relevant business activity, improving the market structures and promoting consumers' interests, and as a whole the positive effect outweighs the negative impact on competition in the relevant market.

Vladimir Penkov has extensive experience in negotiating, studies, preparation of legal documents and representation of clients in various areas of commercial law, such as banking and finance, corporate law and commercial contracts, competition, privatization and foreign investment , investment management, mergers and acquisitions, project financing, procurement, licensing and know-how contracts, tax law, telecommunications & media, energy law and renewable energy .

Vladimir can be contacted on + 359 2 971 3935 or by email at

Svetlin Adrianov has significant experience in consulting and representation of clients in the fields of competition law, consumer protection, privatization and foreign investment, mergers and acquisitions, bank financing and securities, as well as litigation and arbitration. Mr. Adrianov has been repeatedly singled by editions like Chambers, Legal 500, etc., as a leading expert in the field of competition law in Bulgaria.

Svetlin can be contacted on + 359 2 971 3935 or by email at

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