BULGARIA Law and Practice Contributed by: Nikolay Zisov, Svetlina Kortenska, Deyan Terziev and Teodora Peycheva, BOYANOV & Co
require more complex compliance and foreign consultant support. Domestic listings may offer limited liquidity, especially for smaller start-ups, while foreign exchanges typically provide bet- ter liquidity due to larger trading volumes. The decision impacts fundraising success, investor reach, and overall valuation. 3.3 Impact of the Choice of Listing on Future M&A Transactions Listing on a foreign exchange can impact future sale feasibility, especially regarding minority shareholder squeeze-out rules. Different jurisdic- tions have varying regulations on squeeze-outs, potentially complicating the process of acquir- ing 100% control. Companies must comply with both home and foreign regulatory requirements, increasing complexity and costs. Foreign listings may attract a different investor base with unique expectations, potentially influencing sale terms. Additional approvals and filings for cross-border transactions can extend timelines and increase expenses. These factors collectively affect the dynamics of future sales for companies listed on foreign exchanges. 4. Sale as a Liquidity Event (Sale of a Privately Held Venture Capital- Financed Company) 4.1 Liquidity Event: Sale Process When a Bulgarian start-up decides to pursue a sale as a liquidity event, the choice between an auction and a bilateral negotiation depends on several factors. For smaller or earlier-stage start-ups, a bilat- eral negotiation with a strategic investor or a private equity firm might be more appropriate. This approach can allow the company to main- tain control over the sale process and poten-
tially negotiate better terms. Larger, more mature companies with a strong track record and sig- nificant assets may be able to attract multiple buyers and benefit from an auction process. This can drive up the price and increase competition among potential bidders. In a strong market with high demand for acquisi- tions, an auction can be a good way to attract multiple bidders and maximise the sale price. In a weaker market, a bilateral negotiation might be more suitable, as it can allow the company to focus on finding a buyer who is willing to pay a fair price despite the challenging market con- ditions. If the company is looking for a quick sale, a bilat- eral negotiation might be more efficient. An auc- tion process can take longer, especially if there are multiple rounds of bidding. If the company’s primary goal is to maximise the sale price, an auction can be a good option, as it can generate significant competition among potential buyers. In some cases, a hybrid approach may be con- sidered, where the company initially conducts a limited auction process to gauge interest and then enters into bilateral negotiations with the most promising bidders. This can help the com- pany achieve a balance between maximising value and efficiency. 4.2 Liquidity Event: Transaction Structure The sale of the entire company is the most common transaction structure for privately held technology companies in Bulgaria, and a sale of a controlling interest with VC funds retaining a minority stake might be considered in certain circumstances. The specific structure chosen will depend on various factors, including the company’s stage of development, the buyer’s preferences, and the VC investors’ objectives.
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