The Bulgarian M&A market in 2010 and prospects for 2011 2nd November, 2010

The Bulgarian M&A market peaked in 2008 The Bulgarian M&A market peaked in 2008 A 10-year view on the Bulgarian M&A market 5,000 Deal Value (EUR mln) No of Deals 4,004 4,000 155 3,576 136 3,277 3,000 2,437 2,493 2,319 80 2,000 73 46 1,000 30 6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 For the period 2000 – 2010, 731 deals were executed in Bulgaria. The total value of these transactions amounts to €19.79 bn The peak of M&A activity in the country occurred in 2008 with 155 transactions, with total value amounting to over €4 bn Source:

Most M&A activity has been concentrated in TMT, Real Estate, and Financial Services Deal value by industry (EUR mln) Deal volume by industry (Number of deals) 5,000 4,004 4,000 155 3,576 136 122 3,000 2,493 80 2,000 1,000 741 2007 2008 2009 2010 2007 2008 2009 2010 Pharma General Manufacturing Utility Trade Other Food & Beverage Financial Services Real Estate & Construction TMT Since 2007 till today, the absolute industry champions are TMT (€2.8 bn), followed by Real Estate & Construction (€2.2 bn), Financial Services (€1.65 bn), and Food & Beverage (€1.59 bn) The leading sectors by number of deals for the period are Real Estate & Construction (123) , TMT (74), Financial Services (57) and General manufacturing (57) Source:

Top 10 Deals in Bulgaria in 2010 Q3 2010 vs. Q3 2009 Quarterly development of the market 1.000 806 27 500 Q3, 2009 Q3, 2010 Q1, 2010 Q2, 2010 Q3, 2010 Deals Value (EUR mln) No of deals Deals Value (EUR mln) No of deals Source:

TMT and Real Estate dominated the M&A landscape in 2010 Deal value by industry (% of total) Deals volume by industry (% of total) 1% 1% 1% 15% 0% 5% 0% 0% 5% 29% 58% 30% 15% TMT Other Food & Beverage Real Estate & Construction General Manufacturing Utility Trade Financial Services Pharma Deals in TMT, Real Estate & Construction and Trade sectors constitute 96% of the total deal value in 2010 In terms of volume, Real Estate & Construction sector dominates with 24 deals, followed by TMT and Trade sectors with 12 and 9 deals, respectively Source: ISI

There is a notable absence of PE deals on the market in 2010 % There is a notable absence of PE deals on the market in 2010 Deals value by type of investor (% of total) Deals volume by type of investor (% of total) 4,7% 0,3% 3% 3% 3,4% 1% 0,4% 5% 0,7% 0,4% 0,4% 40% 38% 89,5% Bulgarian Strategic Individuals PE Fund Government Foreign Strategic n/a Bank MBO Foreign strategic investors dominate the landscape in terms of deal value, but are less in absolute number than local buyers There is a notable absence of PE deals on the market Bulgarian MBOs and bank repossessions are starting to appear on the market Distressed sales and company reorganizations are driving a lot of the sales Source: ISI

Investments by Bulgarian companies also decreased in 2010 Deal value and volume, Bulgarian companies investing in Bulgaria Deal Value (EUR mln) No of Deals 59 50 38 25 83 52 6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Majority of Bulgarian companies investments in Bulgaria are up to €10 mln. Main investors are big holdings such as Eurohold, Chimimport, Alfa Finance Holding, Sopharma, and others Majority of larger deals above €10 mln are privatizations Source:

Deal value and volume, Bulgarian companies investing abroad The level of investment of Bulgarian companies abroad has also decreased Deal value and volume, Bulgarian companies investing abroad 150 Deal Value (EUR mln) 146 No of Deals 50 11 29 25 4 3 7 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 For the period 2000 – 2010, 49 cross-border transactions have been completed with a total value of €296.1 mln Bulgarian investors are most active in the neighboring countries Source:

Why deals don’t happen? Marketing Non-binding offers Due Diligence Negotiations Valuation gap Lack of financing Committment of buyers Negative image of Bulgaria Reduced attractiveness of CEE Stricter due diligence requirements by buyers Less than perfect accounting, corporate governance, legal practices of Bulgarian firms The issue of theoretical risks Time Reps and warranties

% Bulgaria’s overall international coverage is reasonable in absolute terms… but quality assessment of it is pending Country share of voice in global print media Int’l media coverage by region Total number of articles: 12,387 100 100 100 100 100 1,618 articles 2% 2% 2% 1% 4% 1% 3,505 articles 12% 12% 10% 21% 28% 13% 6% 1,845 articles 15% 13% 22% 19% 25% 27% 2,580 articles 2,839 articles 59% 23% 49% 47% 37% 24% Hungary Bulgaria Romania Serbia Slovakia Hungary Bulgaria Romania Serbia Slovakia Int’l vs. local media proportion of coverage by country Middle East Assia Rest of the world Russia North America Europe Int’l media Local media Bulgaria’s overall FDI/M&A mention in the global media is on par with other countries in the region Although, there is still room for improvement as far as quantity and quality is concerned Hungary Bulgaria Romania Serbia Slovakia Source: Commetric

Contacts Entrea Capital Address: 35/6 Nikola Vaptsarov Blvd Sofia 1407, Bulgaria Tel: + 359 2 862 7838 Tel/Fax: +359 2 962 0588 Web: www.entrea-capital.com