BULGARIA Trends and Developments Contributed by: Venelin Dimitrov and Iva Georgieva, Komarevski Dimitrov & Partners
• acquisition of at least 10% of the capital in a com - pany engaged in high-tech activities; and • a new investment in a Bulgarian entity exceeding EUR2 million (or equivalent in local currency). Although the screening framework is broad, it is expected that Bulgarian authorities will adopt a risk- based and proportionate approach, similar to those in Germany or Austria. FDI screening adds a layer of procedural complexity, but for well-prepared investors it is manageable. Most PE sponsors are now accus - tomed to this type of regulatory overlay in other juris - dictions and are adapting their deal timelines accord - ingly. ESG: still emerging, but gaining ground While ESG (environmental, social and governance) standards are now deeply embedded in M&A pro - cesses in Western Europe, Bulgaria remains in the pre-implementation phase of most hard regulations – notably the EU’s Corporate Sustainability Reporting Directive (CSRD). Most Bulgarian companies will become subject to the CSRD and start reporting in 2027–2028 (if Omnibus is not adopted), depending on size, legal structure and cross-border operations. This gives businesses a window of 24–36 months to design ESG frameworks, implement data collection systems and define KPIs. PE funds, however, already require ESG screening as part of their internal investment committees – particu - larly regarding governance, employee practices and environmental compliance. In practice, this means that, even if ESG obligations are not yet mandatory under Bulgarian law, they are becoming functionally non-negotiable in due diligence and valuation: • sellers with documented ESG policies and risk maps tend to command greater buyer confidence; and • targets that lag on ESG transparency often face pricing discounts, delayed closings or heavier con - tractual protections.
The bottom line is that ESG is here, even if not yet legislated in full – and early movers will benefit dis - proportionately from its integration into M&A strategy. Regional Context: Bulgaria and the European Mid- Market What makes the current time particularly important is how closely Bulgaria’s M&A trends mirror those across other European markets – especially in the mid-mar - ket segment. Sector priorities are converging The sectors receiving the most attention from inves - tors in Bulgaria – renewables, digital services, financial technology and manufacturing – are identical to those prioritised in other European jurisdictions, including: • Poland and Romania, where digital infrastructure and green energy are dominant; • Greece, where energy storage and telecoms infra - structure are attracting record PE interest; and • the Baltics, where tech-enabled businesses and nearshoring capacity are in high demand. This alignment enhances the case for Bulgaria’s inclu - sion in regional strategies. Investors who already have exposure to Central and Eastern Europe often view Bulgaria as a logical next step. Deal structuring and execution practices are aligned From a transaction mechanics perspective, Bulgaria is increasingly applying tools that are now standard elsewhere in Europe: • locked-box pricing models dominate in PE-led processes; • W&I insurance is readily available from international carriers; • earn-outs and equity rollovers are used to bridge valuation gaps; and • management incentive plans are embedded in almost all mid-cap deals. These similarities reduce friction for foreign buyers and shorten the learning curve when entering the Bulgarian market. Many deal teams report that – from a process standpoint – transactions in Bulgaria are
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