Bulgaria has, to say the least, performed commendably at shielding its economy from the significant disruption seen in many other European markets. GDP sank 4.2% in 2020, one of the lowest figures in the EU, and was partly supported by an extensive wage subsidy scheme that saw the government cover 60% of wages for employees who would otherwise have been made redundant.
Unsurprisingly, the relatively stable economic climate has allowed larger law firms, both international and local, to continue undisrupted throughout the pandemic period. Veronika Hadjieva of Kambourov & Partners reports that ‘2020 was arguably one of the strongest years the firm has ever had’ as it ‘managed to complete a large number of M&A, even some that were initially put on hold or pending’.
As is the case throughout most of the region, the Bulgarian market is dominated by local, independent firms such as Kambourov & Partners. One such exception to the rule is CMS, which is the largest international law firm in the nation, with over 40 lawyers, having opened its Sofia office in 2005. Ivan Gergov, a senior associate at the firm, shares a similar experience to Hadjieva, reporting that ‘the last financial year was on par with our performances in the past’.
In terms of drivers, the nation’s goal to align itself with the EU’s green energy targets by adding 2.6GW of renewable capacity by 2030, has been a considerable generator of activity. Hadjieva points to the energy industry as one of the nation’s ‘most dynamic sectors, with a particular uptick in renewables’, a sentiment shared by Gergov, who notes that ‘multiple energy projects have come to fruition, the majority of which related to green energy sources’.
‘2020 was arguably one of the strongest years the firm has ever had.’ Veronika Hadjieva, Kambourov & Partners
Evidence of the vibrancy of the sector, as well as the inward investment it is garnering, came from CMS as it advised Malta-based ACF Renewable Energy on the sale of its 60.4 MWp photovoltaic site, known as The Karadzhalovo Power Plant, to Energy Development, Austria’s largest owner and operator of PV plants. The site is of enormous magnitude, generating 85.56 GWh of carbon-neutral energy in 2019 and consists of 214,000 solar modules, powering 27,000 households. The transaction, which is the nation’s largest ever for an operational renewable energy project, is emblematic of the market’s appetite for deals within the shadow of Covid, eventually closing after 18 months of negotiations due to pandemic induced delays.
Also of note, according to Hadjieva, has been the ‘regional expansion of major players, as well as the European expansion of international companies’ while Gergov also highlighted a rise in M&A activity stemming from ‘cheap debt and large cash deposits, accumulated by institutional investors and private equity funds alike’.
In another market standout and testament to Hadjieva’s regional expansion comments was her firm’s advising of United Group, an SEE telecoms provider, in its acquisition of Bulgaria’s Nova Broadcasting Group, the nation’s largest multi-platform media company. The acquired company operates ten TV channels, four radio stations and several websites, most notably NetInfo which is estimated to reach 80% of the Bulgarian population each month. While the exact figure of the acquisition is undisclosed, local media have reported that it weighed in at a hefty €300m, a figure which, combined with the profile of the client, clearly showcases that market-disrupting deals remained steadfast throughout the pandemic period.
Needless to say, given the nation’s resilience through the worst of the pandemic, both lawyers were fairly bullish on the next 12 months, for both their firms and the wider legal sector. Hadjieva reports that ‘the market is quite robust and stable’ and that ‘while the pandemic is still a test of adaptability and survival, our performance in 2020 means we can safely say that we are well-positioned to tackle any adversities and reinvent ourselves if needed’.
‘Established law firms are well positioned for a continued pandemic on the basis of established relationships with long-lasting clients.’ Ivan Gergov, CMS
As for Gergov, he warns that another lockdown would ‘cool off investors and lead to a decline in transactional activity’ though forecast that ‘the established law firms are well positioned for a continued pandemic on the basis of established relationships with long-lasting clients’.
In the longer-term, he even speculates that the biggest market disruptor will not be Covid but rather the repositioning and ‘inevitable consolidation of independent law firms’ as they look to position themselves for an influx of international investment through ‘boosting their headcounts which will attract even more referral work from abroad’. LB