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After having collaborated for around 3 years in the field of digital cloud solutions, in March 2021 the Bulgarian IT company Bulpros and the German ec4u entered into a merger agreement. With this, the European fund Silverfleet Capital became the majority owner of the new firm. Now, a couple of months later, the newly established firm begins operating under the new brand name DIGITALL. The deal marked the most significant sale of a Bulgarian IT company in the last 5 years and the third biggest one in the entire software corporate history of the country.
Led by Ivaylo Slavov, one of Bulpros’s co-founders, as CEO and David Laux, who is a former CEO at ec4u, as COO, DIGITALL will focus on developing a cloud-based platform and combining the strengths of the two companies in terms of talent, customer base and partners.
Who are the key stakeholders in the deal
Bulpros is a company with a 10-year-old history and specializes in the digital transformation of companies by providing them with digital, cybersecurity, and cloud migration services. The company has won itself the name of being among the fastest-growing tech companies and has been recognized by Deloitte in their “Technology Fast 50 in CE ” and Financial Times 1000 Europe. According to the Commercial Registry, in 2019 the company made €43M in revenue and around €1.8 in profits (disclaimer – 2020 results are not available yet). The Bulgarian IT company has built partnerships with some of the leading Fortune 500 IT companies such as Cisco, Microsoft, IBM, VMware, and SAP.
Ec4u, founded in 2000, is much older than Bulpros and provides digitization services in marketing, sales, and e-commerce across the full customer lifecycle. This includes offering consulting services, technical implementation, and support, as well as the operation of customers’ CRM systems. Despite the seeming overlap in the offerings of the two companies, Slavov has stated that the services of Bulpors and ec4u complement each other mostly because of the different geographic scope as ec4u serves mainly the German, Austrian and Swiss markets.
The EU private equity fund Silverfleet Capital usually invests in companies that are valued between €25M and €300M and over the past 30 years has backed more than 120 companies in the consumer, manufacturing, healthcare, and services verticals with a total of €3.7B. The second independent fund of the venture capital firm was closed in 2015 with commitments of €870M.
The background of the merger
Even though the exact amount of the Bulpros – ec4u deal remains undisclosed, according to estimates of Bulgarian busines publication Capital, the valuation of Bulpros at the time of the merger has been around €45 – €50M. Under the agreement, Bulpros and ec4u created a combined platform with over 1400 employees in 25 offices across 11 countries, with Bulpros alone having 1000 employees and 20 offices.
Both the managers of ec4u, and the founders of Bulpros, Ivaylo Slavov, Denitsa Mihova, Yordan Ginev, and Petar Dushanov, remain large stakeholders in the companies and will take care of the operations of the newly established firm. The Bulgarian VC funds BlackPeak and NEVEQwhich invested in Bulpros in 2015 and 2016 and had respectively 7% and 15% equity in the company, made an exit.
M&A ecosystem effects
In the last five years, Bulpros has been focused on acquisition-led growth. Most recently it bought a majority stake in Bulgarian integrator Beam, while in 2016 and 2017 it acquired the German Innotec Marketing and Group Business Software. Slavov has commented that they are now eyeing acquisitions of US companies in order to meet the growth requirements of their investors and shareholders in the new company.
Taking a more bird’s eye view at the Bulgarian ecosystem, with the last deal of Bulpros, all five largest IT companies on the local market have foreign majority stakeholders. The largest-ever transaction in the Bulgarian software market was Telerik’s acquisition by Progress in 2014 for $262.5M, the second largest was Dynamo Software’s acquisition by the US fund Francisco Partners for $70M, and the Bulpros deal comes at third place. The effects of such agreements usually take a year or two to be felt when it comes to their impact on the economy and labor market.