Overview: A Market on the Rise

The Bulgarian M&A market has entered a new phase of growth and maturation. In recent months, deal volume has increased, investor interest has diversified, and the market overall has become more aligned with prevailing trends across the European mid-market space.

While Bulgaria remains a small economy relative to other EU jurisdictions, its potential as a destination for value-driven acquisitions is gaining recognition. This is especially evident in sectors such as renewable energy, real estate, IT services and financial services, where growth trajectories and operating margins remain strong, and where private equity (PE) funds in particular are showing sustained interest.

Several key developments in Bulgaria’s political and economic environment have helped drive this momentum. Leading are the country’s accession to the Schengen Area (as of 1 January 2025) and the forthcoming introduction of the euro in January 2026. These steps towards deeper EU integration serve as important confidence signals for international buyers and funds. In addition to the above, local conditions remain favourable as well. Bulgaria has relatively low public debt, and a conservative fiscal framework.

Collectively, these developments are contributing to investor comfort, attracting interest not only from the region but also from Western Europe and North America. In this context, the M&A market – and in particular PE activity – in Bulgaria appear poised for continued activity in the medium-term.

PE: the Leading Force Behind Deal Flow

Over the past 12 to 18 months, PE investors have become the most consistent and influential participants in the Bulgarian M&A market. They are not only executing acquisitions but are also shaping the way deals are sourced, structured and negotiated.

Most of the active players are small to mid-sized funds managing assets in the range of EUR100 million to EUR20 billion. Some have broader pan-European mandates, while others are focused specifically on South-East Europe or the broader Central and Eastern European (CEE) region. In either case, their presence is increasing both the quantity and the quality of deal making in Bulgaria.

What is driving PE interest?

Several factors make Bulgaria an appealing target for PE investment.

• Attractive valuations: entry multiples remain lower than in more developed Western markets, offering potential for multiple expansion at exit.
• Sectoral opportunities: key sectors – such as IT, real estate, renewables and financial services – offer scalable platforms with strong regional relevance.
• Favourable currency conditions: the lev has been pegged to the euro for years, which reduces foreign exchange (FX) risk. Effective from 1 January 2026, the euro will be an official currency in Bulgaria, making the country even more attractive for euro-denominated funds.
• Regulatory alignment: Bulgaria may not be the frontrunner in transposing EU legal framework, but in fact the number of gaps is relatively small – offering growing predictability for institutional investors.
• Exit potential: strategic buyers are showing renewed interest in the region, providing credible exit routes within reasonable holding periods.

What does PE bring to the market?

The increasing presence of PE has transformed the tone and structure of many Bulgarian deals. Both investors and entrepreneurs have become more attuned to the following:

• professionalised deal processes – PE funds conduct swift red-flag due diligence and lead the way in introducing international standards of documentation and execution;
• value creation strategies – PE sponsors typically bring not only capital but also operational experience, growth frameworks and M&A bolt-on playbooks;
• disciplined valuations – PE acquirers are less likely to overpay based on short-term trends and are more focused on long-term cash flows and exit pathways; and
• management incentives– PE ownership often comes with structured incentive plans, including equity rollovers and earn-outs (mechanisms that align interests and reward performance).

Impact on local sellers

Founders and local business owners are becoming more familiar with PE-style transactions. While these deals can be more intensive in terms of preparation and execution, they are typically quicker and also offer more transparent negotiations, access to strategic growth capital and credible long-term partners.

Sector Focus: Where PE Activity Is Concentrated

Several sectors stand out in the Bulgarian M&A landscape due to investor interest, business fundamentals and regional scalability. While transaction volumes are still modest in absolute terms, the depth and seriousness of investment activity continue to grow in these areas.

Renewable energy and battery storage

Bulgaria remains a regional leader in terms of solar irradiation and land availability, making it an attractive destination for renewable energy investments.

• Investor appetite spans both operational assets and greenfield development projects, particularly in the 30–150 MW range.
• There is increasing focus on:
1. hybrid projects that combine solar, wind and battery energy storage systems (BESS) – particularly relevant in light of grid balancing needs; and
2. standalone BESS.
• Bulgaria also benefits from low permitting costs, qualified engineering capacity, and access to EU funding instruments.

PE and infra funds view energy as both a long-term play and a hedge against economic volatility. Investments in renewables are also a means to achieving greener economy. M&A activity in this space has been further supported by a handful of notable large-scale transactions in 2024 and 2025, including platform investments exceeding EUR100 million (eg, United Group’s investment of EUR120 million in three PVPPs).

IT and tech-enabled services

The Bulgarian IT sector continues to mature – moving from low-cost outsourcing into product-based platforms, Software as a Service (SaaS) solutions, and niche enterprise service models. The country is now home to a number of scalable digital businesses with pan-European client bases:

• PE firms are targeting product-first companies with strong engineering teams and high client retention rates;
• buy-and-build strategies are increasingly used, especially in software development, IT outsourcing, DevOps and cybersecurity; and
• management is experienced with international clients, and is open to post-transaction integration and growth planning.

Notable transactions in this market – including acquisitions of small IT service providers by regional platforms – have signalled a clear path to consolidation. Mid-sized PE sponsors often act as catalysts by providing the capital and M&A know-how necessary to scale efficiently (eg, acquisition of Devision by Codery, backed up by Silverline Capital).

Financial services and fintech

While Bulgaria is home to several local banks, few have stood out as viable regional challengers. The authors expect developments in this direction as well, but at present more active participants in transactions in this sector are regionally represented players.

The acquisition of TBI Bank by Advent International has drawn renewed attention to the fintech sector and the potential for technology-driven financial services. It is worth bearing in mind that in 2024 Advent International also acquired a Bulgarian fintech providing innovative and affordable payment solutions for small and medium-sized enterprises (SMEs) across Europe.

Non-bank lenders and digital credit platforms are especially attractive due to their asset-light models and capacity for cross-border scaling.

Niche fintech providers – such as those focused on invoice financing, e-wallets, or SME credit scoring – are also on the radar of regional PE funds.

While regulatory licensing remains complex, Bulgaria’s membership in the EU ensures passporting potential and alignment with core financial regulations.

Further deal activity in this sector is likely to come not only from traditional investors but also from strategic buyers looking for embedded finance capabilities or local distribution networks.

Manufacturing and export-oriented industry

Despite not being as “trendy” as other sectors, Bulgarian manufacturing remains a cornerstone of M&A activity, especially for funds and strategics focused on operational optimisation and regional expansion.

Sectors of interest include industrial equipment, automotive components, electrical engineering, metal processing and packaging.

Many companies in this space are family-owned, cash-generative and undercapitalised – making them strong candidates for PE investment.

As supply chains become more regionalised post-COVID-19, and as European manufacturers look to shorten delivery times, Bulgarian firms with solid fundamentals are increasingly positioned to become strategic suppliers or bolt-on platforms.

Consolidation potential in the services sector

An emerging opportunity in the Bulgarian M&A market lies in the consolidation of certain fragmented service sectors, and there are plenty of those. Areas such as healthcare, dental care, facility management and professional education are populated by numerous small and mid-sized players with similar business models and overlapping client bases.

Local and regional PE funds increasingly view these sectors as ripe for roll-up strategies, where synergies in cost structure, branding and technology can create scalable national or regional leaders. PE funds, in particular, are well positioned to lead such consolidation efforts, using Bulgaria as a launch pad for expansion across the Balkans and beyond.

Real estate: targeted PE interest in commercial assets

While PE involvement in the residential segment of Bulgaria’s real estate market remains rare – largely due to its fragmentation and dominance by local investors – there is growing interest in commercial real estate.

Traditionally, ownership of large retail centres – such as malls – has been concentrated in PE funds. These investments benefit from stable cash flows, professional property management and long-term lease agreements.

More recently, PE’s attention is expanding to specialised real estate assets, where development and operations require a high degree of professionalisation. Demand is especially strong in two areas:

• data centres, which are seen as essential digital infrastructure but remain underdeveloped relative to market needs; and
• logistics and warehousing, where increased e-commerce activity and regional supply chain reorganisation are driving sustained demand for high-spec facilities.

Deal Structures: Becoming More Sophisticated

As the investor base matures and the profile of transactions changes, so too does the way Bulgarian M&A deals are structured and closed. The local practice increasingly reflects international standards, especially in deals involving PE sponsors or cross-border parties.

W&I insurance: from novelty to norm

Warranty and indemnity (W&I) insurance is becoming a familiar tool in Bulgarian deals above a certain threshold (typically north of EUR25 million enterprise value). It is particularly popular in:

• PE exits, where sellers want clean separation and minimal tail liability;
• competitive processes, where W&I provides comfort to buyers and avoids negotiation bottlenecks; and
• founder sales, where individuals may not be able (or willing) to offer robust indemnities.

International insurers are now paying more attention to Bulgarian transactions, and local legal advisers are increasingly gaining experience in managing underwriting processes and disclosures.

Locked-box and completion accounts

While completion accounts are still the prevailing completion mechanism, thanks to the increased PE involvement on the Bulgarian M&A market, the locked-box accounts mechanism is rapidly gaining traction as it is a quick and clean alternative.

Earn-outs, escrows and deferred payments

Valuation gaps – especially in sectors where future performance is hard to predict – are often bridged using earn-outs or contingent pricing mechanisms. These are now standard tools, particularly in deals involving:

• IT companies with growth projections based on product launches;
• services firms where client retention or key person continuity is uncertain; and
• founder-led businesses where transition periods are necessary.

Escrow arrangements and holdbacks are also common, usually in the range of 5–15% of the purchase price and held for 12–24 months post-closing.

FDI screening: a new planning variable

With Bulgaria’s new foreign direct investment (FDI) screening regime, investors are adjusting their timelines and structuring approaches.

While approvals are generally expected to be granted, the process may add 30–60 days to the timeline.

Legal advisers recommend early engagement with authorities and inclusion of FDI-related conditions precedent in SPAs.

This development is not deal-stopping, but it does mark a shift in how early-stage planning and regulatory risk are handled in Bulgarian M&A.

Regulatory Developments and ESG: Adapting to New Realities

FDI screening in practice

The entry into force of the last piece of legislation from the FDI screening regime in Bulgaria, in July 2025, marked the country’s alignment with broader EU standards. While the system is still new, several key parameters are already shaping investor behaviour.

FDI screening is mandatory and suspensive, meaning that relevant transactions cannot close before obtaining clearance. It applies to non-EU investors acquiring direct or indirect ownership in Bulgarian entities active in sensitive sectors, as defined under Article 4(1) of EU Regulation 2019/452 – including energy, telecommunications, defence, transport and critical technologies.

Screening is triggered if any one of the following thresholds is met:

• acquisition of at least 10% of the capital in a company operating in a sensitive sector;
• acquisition of at least 10% of the capital in a company 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 accustomed to this type of regulatory overlay in other jurisdictions and are adapting their deal timelines accordingly.

ESG: still emerging, but gaining ground

While ESG (environmental, social and governance) standards are now deeply embedded in M&A processes 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 – particularly 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 contractual protections.

The bottom line is that ESG is here, even if not yet legislated in full – and early movers will benefit disproportionately 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-market segment.

Sector priorities are converging

The sectors receiving the most attention from investors 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 infrastructure 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 inclusion 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 now as efficient as those in comparable EU markets, provided local expertise is engaged early.

The legal and advisory ecosystem is capable

Local Bulgarian M&A counsel and financial advisers are increasingly involved in cross-border and fund-driven deals. This has two important effects:

• deal execution is more predictable – even in multi-jurisdictional contexts; and
• international buyers feel confident in local capacity, especially in regulated sectors.

Combined with consistent EU law harmonisation, this means that Bulgaria is becoming less of a “peripheral” market and more of a legitimate EU mid-market destination.

Outlook: What to Expect in the Next 12–24 Months

The next two years are likely to be formative for the Bulgarian M&A market. Many of the positive fundamentals are already in place, and as both local and international stakeholders adapt to the new environment, several clear trends are expected to unfold.

Sustained PE activity

There is every indication that PE will continue to drive deal flow in Bulgaria:

• funds that already made initial investments are now preparing for bolt-on acquisitions;
• new funds with regional mandates are actively seeking platform targets; and
• competitive tension among PE bidders is increasing, especially in sectors with limited high-quality targets.

The authors also expect more Bulgarian businesses to approach PE proactively, viewing it as a viable alternative to strategic M&A or generational succession. Founders are increasingly open to partial exits or co-ownership models that preserve control while enabling growth.

More complex and cross-border deals

As legal and financial infrastructure becomes more advanced, Bulgarian M&A is expected to feature:

• more multi-jurisdictional elements, particularly in IT, energy and fintech;
• increased use of leverage in deals, especially with regional banks joining syndicates;
• greater demand for post-closing integration planning, driven by PE’s operational focus; and
• a rise in vendor due diligence (VDD) packages as sellers aim to professionalise sale processes.

Transaction documents and processes are likely to mirror those seen in Austria, Hungary or the Czech Republic – jurisdictions with more established M&A ecosystems but similar legal foundations.

Growing market maturity

Several indicators suggest that the Bulgarian M&A market is maturing quickly:

• sellers are better prepared and advised;
• processes are increasingly competitive and timeline-driven; and
• buyers are more sophisticated in their approach to risk, valuation and integration.

In parallel, the number of active financial advisers, M&A lawyers and tax consultants with deal experience is steadily growing. This will improve execution quality and reduce friction in cross-border deals.

Moreover, macro tailwinds – including adoption of the euro, EU funding, and regional economic recovery – are likely to support deal activity across industries.

Conclusion: a Market Coming Into Its Own

Bulgaria’s M&A market is leaving the periphery. While transaction volumes remain modest by European standards, the quality, structure and strategic intent behind many deals has improved substantially over the past two years. PE is the defining factor in these changes – not only by increasing activity but by reshaping the culture of transactions in the country.

Key takeaways include the following:

• Bulgaria is increasingly seen as part of a regional strategy by PE funds, and not as an isolated or high-risk bet;
• local businesses are more open to outside capital, and founders are increasingly aware of exit-readiness standards;
• legal and regulatory frameworks are aligned with EU expectations; and
• advisers on the ground are highly capable of supporting complex, cross-border and fund-driven transactions.

For investors – particularly those with experience in Central and Eastern Europe – Bulgaria now offers a real opportunity to source scalable, well-run and attractively priced companies across multiple sectors.

For local entrepreneurs and shareholders, the current environment provides a window of opportunity to engage with experienced capital partners and realise long-term value.

In short, this is a market in motion – and for those prepared to navigate its nuances, the Bulgarian M&A space in 2025–2026 may prove to be one of Europe’s more rewarding destinations.