Category: Bulgaria

Tsvetkova Bebov Komarevski, working with lead counsel Gianni & Origoni, has advised Alperia S.p.A., Dolomiti Energia Holding, and Finest S.p.A. on the sale of PVB Power Bulgaria AD and five hydropower plants along the Iskar River in Bulgaria to Akuo Energy, a French renewable energy independent power producer. Spasov & Bratanov advised Akuo Energy on the deal.

TBK’s team included Partner Venelin Dimitrov, Senior Associate Aleksandar Aleksandrov, and Associate Mirela Hristova.

Gianni & Origoni’s team in Rome included Partners Francesco Puntillo and Francesco Bruno and Associate Debora Abrardo.

Spasov & Bratanov’s team included Partner Vassil Hadjov and Associates Vladimir Tashev and Petar Dyankov.

Schoenherr and Kambourov & Partners have advised the United Group on the acquisition of Sofia’s Net1 telecom operator. Schoenherr also advised the United Group on the acquisition of Digital Cable Television, a telecommunications operator in the Bulgarian city of Plovdiv, operating under the brand name N3. Dimitrov & Partners advised the sellers of N3 on that deal.

Both deals remain contingent on regulatory approval.

Schoenherr describes the United Group as “the leading multi-play telecoms and media business operating in South Eastern Europe.” The company, which is owned by BC Partners, provides customers with a range of telecommunications services. The United Group entered the Bulgarian market in 2020 with its acquisition of Vivacom, again with Schoenherr’s assistance (as reported by CEE Legal Matters on August 4, 2020), in a deal that was selected as the 2019 CEE Deal of the Year for Bulgaria (as reported by CEE Legal Matters on June 30, 2020). 

According to Schoenherr, “Net1 is among the leading operators in the Sofia region providing Internet and pay-TV services to residential users as well as integrated telecoms solutions for businesses, including services such as IT support, telephony, and video surveillance.” According to the firm, N3 “provides digital television and Internet for household and business needs. Its services are based on new technologies and a well-maintained infrastructure. It offers over 200 digital channels, 20 of which have High Definition resolution. In addition, N3 offers the free N3play app to its customers which provides the ability to watch 50 TV channels on mobile devices.”

According to Schoenherr, “Net1’s sale was a debt-for-equity (refinancing) deal. It involved the sale of a distressed asset (Net1) by its key financial lender (First Investment Bank AD) and debt re-financing. The combination and interplay of M&A elements and financing elements made this deal particularly complex. Another challenging element was securing United Group’s rights in view of competing interests of other creditors of Net1.”

The Schoenherr team advising the United Group on the Net1 transaction was led by Partner Ilko Stoyanov and Head of Banking & Finance Tsvetan Krumov, supported by Attorneys at Law Katerina Kaloyanova-Toshkova, Milena Gabrovska, and Galina Petkova. Stoyanov, Kaloyanova-Toshkova, and Galina Petkova also advised the United Group on the Net3 deal.

The Kambourov & Partners team acting for the United Group on the Net1 acquisition was led by Partner Veronika Hadjieva.

The Dimitrov & Partners team included Managing Partners Slavi Dimitrov and Angelina Mileva and Partner Iva Nikolova.

Kinstellar has advised the KBC Group N.V. and its Bulgarian subsidiary DZI-Life Insurance EAD, on their successful EUR 77.7 million bid for NN’s Bulgarian pension and life insurance businesses. The deal, which remains subject to regulatory approvals, is expected to close in the course of 2021.

As part of the deal, DZI-Life Insurance EAD acquires all the shares of NN Pension Insurance Company EAD (Bulgaria), and all the assets and liabilities of NN Insurance Co. Ltd. – Sofia Branch (Bulgaria).

The KBC Group N.V. is a Brussels-based provider of insurance services to private clients and small and medium-sized enterprises in Belgium, Ireland, Central Europe, and South-East Asia.

Kinstellar’s team included Sofia-based Partner Diana Dimova, Managing Associates Nina Tsifudina and Atanas Mihaylov, Counsel Svilen Issaev, Senior Associate Zornitsa Georgieva, Associate Gabriela Ivanova, and Junior Associates Petar Popov and Ilia Lassin. The firm did not reply to an inquiry about the deal.

Editor’s note: After this article was published, Boyanov & Co informed CEE Legal Matters that it had acted as local counsel to the NN Group. The firm’s team was led by Partner Yordan Naydenov and included Partner Alexander Chatalbashev and Senior Associate Borislav Notovsky.

Former Senior Associates Donka Stoyanova and Pencho Stanchev have been promoted to Partner at Dimitrov, Petrov & Co.

According to DPC, Stoyanova has established an “enviable track record in the areas of public procurement, competition, litigation, administrative, commercial, corporate, and international private law.” The firm describes her as “an experienced competition litigator having successfully represented clients before the Bulgarian competition authority and in court proceedings for market abuse, collusion, cartels and other unfair commercial practices.”

Stoyanova has an LL.M. from Sofia University St. Kliment Ohridski. She has been with DPC for 13 years.

Stanchev specializes on dispute resolution, banking, and energy law. He has an LL.M. from Sofia University St. Kliment Ohridski, too. Before joining DPC, he spent one year with Corporate Commercial Bank AD.

Schoenherr has advised Germany’s Osram GmbH on the sale of its Bulgarian business to the Sanmina Corporation. Hogan Lovells and Djingov, Gouginski, Kyutchukov & Velichkov advised Sanmina Corporation on the deal.

Schoenherr’s team was led by Partner Ilko Stoyanov and included Attorneys Manuel Ritt-Huemer and Katerina Kaloyanova-Toshkova.

Djingov, Gouginski, Kyutchukov & Velichkov’s team included Partner Zdravka Ugrinova and Counsel Ralitsa Gougleva.

It has been a challenging year for the Bulgarian M&A market, with limited activity, just like in 2019. Undoubtedly, one of the reasons for the slowdown is that business is overshadowed by the coronavirus pandemic. Many acquirers abandoned expansion plans in order to focus on protecting both their financial stability and their employees, while waiting to assess the market environment and evaluate potential next steps. Many planned or already-started deals were cancelled at early stages (such as following a letter of intent or during preliminary due diligence) as uncertainty about the fulfilment of potential goals made the transactions risky.

Acquirers are cautious, as the prospects for many businesses remain vague. According to recent forecasts, the risk of bankruptcy has increased by about 20% since 2019. The sectors which are most severely affected by the crisis are transport, tourism and leisure, manufacturing, and non-essential retail/consumer accommodation and food service activities. It seems probable that the series of measures undertaken by the state to mitigate the impact of the coronavirus crisis on businesses will only temporarily postpone bankruptcy filings for some companies. In addition, a domino effect, with bankruptcies of some companies leading to the bankruptcy of others in the chain, is also a real possibility.

The telecommunications, media, technology and innovation, and essential retail sectors have proven to be COVID-19 resistant and are likely to recover first.

Regardless of the turbulence in the year for both companies and investors caused by the pandemic, deals are still happening, although they remain modest in number and value, with investors who are mainly regional or local. In July the First Investment Bank announced a successful capital increase, which was a condition for Bulgaria to apply for accession to the Eurozone’s waiting room (ERM II) and the Banking Union. The new shareholders in the bank – which now ranks fifth the country in terms of assets –  are the Valea Foundation (owned by Czech entrepreneur Karel Komarek) and the Bulgarian Development Bank, which subscribed all the shares of the new issue. Also in July, the Bulgarian government finally signed a concession agreement for Sofia Airport, which will be handed over to the Sof Connect consortium for a period of 35 years. In September, the Bulgarian Commission for Protection of Competition approved another consolidation on the media market: the national broadcaster Nova TV will acquire another three TV channels and four commercial radio broadcast stations.

The Bulgarian IT sector continues to perform really well and attracts most of the investments on the market, as Bulgaria is becoming a more and more vibrant hub. The number of deals in this sector is relatively large, but the transaction values are not high. Some of the deals are the result of a long-awaited distribution of European funds intended to stimulate the Bulgarian economy, while others represent a genuine interest in Bulgarian innovative companies and the development of the IT ecosystem in the country. A notable event during the pandemic was Eleven Capital’s listing on the Bulgarian Stock Exchange – the first venture capital company to do so. The achieved result of over BGN 2.1 million of raised capital, which will be transferred on to Eleven Capital’s portfolio companies, is quite impressive considering the time of listing and the situation on the domestic and global capital markets. Furthermore, the number of venture capital funds investing in high growth Bulgarian SMEs with the support of EU investment initiatives continues to grow. The fourth alternative investment fund has been established with the participation of the Fund of Funds, which is managing BGN 1.2 billion under four EU operational programs, and the fifth one is currently at the contract award stage. The Fund of Fund’s allocations will create a new wave of funding for start-ups and technology companies with growth potential over the next few years.

The M&A environment has changed, and dealmakers will have to adapt, as it is evident that they will be forced to operate under enhanced uncertainty for a prolonged time. Despite these challenges, the current situation is generating opportunities for companies wishing to strengthen their businesses through consolidation, or for those with strong balance sheets that are looking to make acquisitions at depressed asset prices. Skilled acquirers may gain an advantage while other prospective buyers are still figuring out the next steps. The M&A market, however, will most likely continue to be predominantly domestic-focused.

By Dimitrinka Metodieva, Senior Partner, Gugushev & Partners

This Article was originally published in Issue 7.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

On November 18, 2020, CEE Legal Matters reported that Gugushev & Partners had helped Fr. Lurssen Werft GmbH & Co KG, part of Northern Germany’s Lurssen shipyard group, win a public tender for the supply of two multipurpose modular patrol vessels to the Bulgarian Navy. CEEIHM spoke with Dirk Malgowski, Managing Director at Fr. Lurssen Werft, to learn more about the matter.

CEEIHM: To start, please introduce Fr. Lurssen Werft and its operations.

Originally reported by CEE In-House Matters.

On January 18, 2021, CEE Legal Matters reported that DGKV had represented the Mezzanine Partners consortium in a public procurement dispute with the Bulgarian Fund of Funds. CEEIHM spoke with Evgeny Angelov, Managing Partner at Silverline Capital, to learn more. 

CEELM: Tell us about Silverline Capital. When was it established and what areas is it planned to invest in?

Originally reported by CEE In-House Matters.

“It’s very complicated at this moment, with most people changing their mind very often,” says Irena Georgieva, Managing Partner of PPG Lawyers in Sofia, about the situation in Bulgaria. “Everybody is focused on their personal Covid-19-related problems and it’s hard to adequately measure what the community really thinks about the government, as somehow all political decisions are inextricably linked with pandemic issues.” 

“We have parliamentary elections scheduled for the start of April,” Georgieva continues, “so, hopefully, there will be more clarity afterward.” She reports that most legislative activity has ground to a halt and that the country’s regulatory bodies are ineffective. “For example, the Commission for the Protection of Competition and the Commission for Personal Data Protection are almost offline,” she says. “The mandate of the data protection regulator, for instance, expired some two years ago, and nothing was done to appoint anyone new.” Georgieva hopes that this will change after the elections and that the refreshed regulatory bodies will have a more “hands-on approach – especially when it comes to data protection.” According to her, “I hope that our regulators will take a page out of the book of those in the UK, Spain, or Germany – those are the kinds of effort levels we need here.”

Georgieva says it’s almost impossible to assess how exactly a new government will impact Bulgarian business, when predicting what that government itself will look like is, at this point, not easy. “There are a lot of new players out there,” she says, referring to the potential candidates for office, “so it’s difficult to predict who will form the government and, after that, what the ideas and vision for the country will be,” she says.

In the meantime, Georgieva explains, a gap is appearing in the business community between those comfortable with adopting new rules and regulations relating to tech and data innovations and the ones who are not. “There seem to be two kinds of businesses in Bulgaria,” she says. “Those that understand the deep regulatory changes with respect to data protection, cybersecurity, AI, and rapid tech development and are willing to invest in avoiding any potential loss or reputational risk, and those that just see an administrative and a financial burden in them.” The tech regulations are there to allow businesses to evolve, she says, and provide companies with the opportunity that many have overlooked – to “tidy up their houses,” in Georgieva’s words, to structure the individual business units, and to discipline the staff (or, she notes, “as we say in Bulgaria – for the right hand to know what the left hand is doing”). According to her, “here our firm’s team is able to intervene successfully and very smoothly builds the bridge between legal and IT work and the understanding of management about the new necessities.”

Georgieva notes the giant risk this growing gap represents. “If not addressed in some way,” she says, “it could lead to companies taking a deep hit down the road, which might seriously impact the business climate of the country.”

Zaiwalla & Co has helped Bulgarian gas distributor Overgas Group reach a settlement in a dispute with Russia’s Gazprom.

According to Zaiwalla & Co, the dispute centered on Gazprom’s decision to stop supplying natural gas to Overgas in January 2016. According to the firm, “Gazprom claimed that Overgas owed [it] approximately USD 105 million under this arrangement … [and] that the Overgas Group defendants were involved in a complex conspiracy to dilute Gazprom’s shareholding in a joint venture company.” The firm reported that, for its part, “Overgas claimed that Gazprom acted in breach of EU and Bulgarian competition law and in breach of the supply contract by agreeing to sell gas only to state-owned Bulgargaz … [and] argued that the change in structure had been precipitated by Gazprom ceasing gas supplies to the Overgas Group.”

The Overgras Group and Gazprom reached an unspecified settlement on January 28, 2021.

The Zaiwalla & Co team was led by Senior Solicitor Rohit Ralleigh.

Editor’s note: After this article was published, Georgiev, Todorov & Co. announced that it had advised Gazprom in the dispute. The firm’s team consisted of Attorneys-at-Law Mariya Derelieva and Tsvetelina Dimitrova.