M&A Market Bulgaria 2014

Almost all business sectors in Bulgaria grew throughout 2014, although modestly. The only exception are financial services. Value added in the financial services sector dropped by 1.4% compared to the last year. In other sectors growth ranged from 0.4% to almost 3% compared to 2013.2014 could well be divided in to two parts – momentum generating first half and cautious second half, as a consequence of the tension in the financial sector and the political instability.Hopes in 2014 were, that after the glorious debut on the international financial markets of two heavy weight local players, namely Bulgarian Energy Holding and BTC/Vivacom, both placing bonds of half a billion EUR each at the very end of 2013 and gaining a lot of interest (issues were well oversubscribed), international players will turn their eyes also toward the attractively valued Bulgarian companies, boosting local M&A activities.Indeed it did happen, to an extent, with the sale of “Piccadily” chain – food retailer; “Praktiker” hypermarket chain – home improvement and do-it-yourself goods, both acquired by local players; one of the biggest oil distributors – Petrol was also acquired by a Bulgarian financial group, although through a debt restructuring; sale of Credit Agricole – Bulgaria; Speedy – local leader in parcel delivery service sold significant minority stake to the French Geopost; handful of high profile deals in the field of alternative energy field are expected to be closed till end of the year or very beginning of 2015.Take away from all above is that some international players choose a strategy of concentrating on their home markets and selling their Bulgarian subsidiaries. This was mainly due to their restructuring plans, than lack of business perspectives in the country.

Trends in M&A Transactions

The current transaction environment may be described as a “buyers market”, with buyers being extremely sensitive. Reluctance is expected to disappear and growing competition among potential buyers is expected to intensify. Real drivers of the expected growth in interest and subsequently deals closed will be among others: abundance of cash internationally as also locally; cheap and easy access to acquisition finance; record stock prices worldwide; inflated prices of all conventional and alternative asset classes.Inevitably, valuations of P/E of 6 and P/B of 1 for all publicly traded companies in Bulgaria and lower such for the non public companies are going to provoke interest. Supply of potential targets is also likely to grow as after the banking crisis of 2014 and the not very efficient local capital markets local entrepreneurs are expected turn to non traditional ways of attracting capital, knowhow and financial expertise.

Most active Industries

With high level of probability we could say that IT sector is going to attract big interest. On one hand it has the size and the perspectives, on the other hand the country has at its disposal the necessary pool of human capital, which is a key.Special interest should be paid to healthcare where consolidation will be the name of the game. Entrance of international health care chains has to be expected.Food retailers will continue to consolidate and acquirers with the right strategy could easily expand their portfolios, especially considering the really low penetration in this sector.Agri sector and farming where interest preserved for years will gain stronger momentum. Apart from land acquisitions, potential buyers are to be expected for whole farms or big organic orchards.Acquisitions of smaller banks by bigger competitors or completely new players are also likely, especially after the crisis of summer 2014.To sum it up – 2014 could not be described as a year that brought increased activities resulting in numerous deals and bigger deal volume, however, if political stability is proved, Bulgarian companies continue to be an attractive target, not only because of the low valuations, but also because of the dry powder available for quality deals.

Tsankov Group Ltd. | Friday 4 January 2019 | website: investmentsbg.com/en/
Businesses for Sale in Bulgaria – 300 Businesses http://investmentsbg.com/en/
Tsankov Group Ltd. specializes in the sale and subsequent management of operating businesses in Bulgaria. Our management services offers company’s control, inventory tracking, accounting and continuing consulting services. We have access to hundreds of operating businesses in various industries to fit nearly every budget. Our current inventory includes factories, hotels, energy plants, wind mills, gas stations and production factories. We can customize the search of nearly every industry per the customer’s request. We are also a full service real estate brokerage.