Croatia

The predominant M&A transaction structure is a share purchase in private transactions. This is because the majority of corporations in Croatia are incorporated as limited liability companies whose shares are not publicly listed. The transfer of shares requires a relatively simple and swift procedure and, if the shares are held for more than two years, this structure does not trigger any capital gains or other taxes. For listed companies incorporated as joint stock companies, the most commonly applied structures are share purchase and tender offers. In transactions where the buyer typically intends to acquire part of the target’s operations, or where the seller wants to spin off a certain business line, asset purchases are the preferred structure. The scheme of arrangement structure was heavily used approximately 10 years ago, when the new law on pre-bankruptcy settlement arrangements was introduced. Since then, the use of schemes of arrangement has declined significantly and is now rarely seen in practice.

Generally, the M&A sector is vibrant and, for the size of the jurisdiction and the economy, surprisingly resilient to economic turbulence in Europe. The largest investments through M&A deals came from the Netherlands, Austria, Germany and Italy, all within the EU zone. The predominant sectors, when it comes to the most active in terms of transaction volume, are IT, hospitality and healthcare. These sectors have, for quite some time, been on the radar of private equity firms who have been dominant buyers on the Croatian market. It is noteworthy that, aside from the “usual suspects” in Western Europe, we also see a chunk of private equity buyers from the Central and Eastern Europe (CEE) region, notably Poland and the Czech Republic. On the other hand, because these relatively new industry sectors have been the most active for deals, the size of the respective transactions is not as large as in the past, when transactions involved Croatian behemoths.

Despite a relatively high inflation rate (3.4% in 2025) macroeconomic factors remain stable, which continues to drive M&A activity in Croatia. Interest rates are stable, geopolitical risks have not had significant detrimental effects on the import or export of Croatian goods and services and gross domestic product (GDP) growth (over 3% per year), while domestic consumption is fuelling the growth of local corporations, which in turn demonstrate strong and attractive earnings before interest, taxes, depreciation and amortisation (EBITDA) figures.

The M&A market has recently been dominated by private equity (PE) activity, with PE funds being the most active buyers and sellers. Another important feature of the market is dominance of small to medium-sized companies being targeted for the purchase of shares. From the standpoint of the most active sectors, technology/IT services hold an undisputed leading position, attracting strong interest from buyers across the Europe and the U.S. The healthcare sector emerged as the runner-up in terms of the most attractive sector for investment, while fast-moving consumer goods (FMCG) and financial services sectors are also notable.

Transactions involving non-EU-controlled investors will experience significant delays. This is because implementation of the newly introduced Act on Foreign Investment Screening is still lagging at the beginning of 2026, with various participants in the screening regime reporting numerous challenges and issues that must be resolved to establish a sensible and predictable process. Some stakeholders have even proposed a temporary suspension of the Act until the end of 2026 to allow issues to be resolved in the interim. We anticipate this situation will persist until the end of 2026, and investors should remain mindful of these considerations for at least that period.

Another emerging trend is the return of big-ticket transactions. In contrast to the past two years, when the market was dominated by small to medium-sized transactions, we have noted a significant uptick in requests for proposal (RFPs) and transaction initiations worth more than EUR 500 million across various sectors, predominantly those involving traditional industries or FMCG-related businesses. Additionally, nearly all of these big-ticket transactions involve cross-border elements, with targets typically being corporations whose operations span ex-Yugoslavia jurisdictions or extend further across the Balkans.

Finally, we anticipate that the use of warranty and indemnity (W&I) insurance will become increasingly prevalent as private equity firms exit investments across various sectors, given that their corporate structures often do not accommodate traditional or extended liability periods. Furthermore, local transaction stakeholders are becoming increasingly comfortable with the use of this insurance, recognising the benefits it offers when structuring transactions involving private equity participants.

The legal framework for mergers and acquisitions is primarily governed by the Companies Act and Obligations Act. The former establishes the general framework for legal requirements governing mergers, spin-offs, and divisions of corporations, while the latter sets out contractual requirements and mandatory content of relevant share purchase and transfer agreements. Furthermore, the Takeover Act is the most important legislation for mandatory public offers. In addition, the Market Competition Protection Act regulates antitrust approval procedures and the legal requirements for obtaining such approvals. Finally, there are specific rules and regulations regarding acquisitions of companies from the media sector, banks or other financial institutions and brokerages.

The principal regulators overseeing mergers and acquisitions and monitoring compliance with the aforementioned legislation are the Croatian Securities Supervision Agency and the Croatian Competition Agency. Commercial court registries also play a significant role in mergers and acquisitions, serving as the official company registry by maintaining corporate records and processing all changes relating to management, shareholders, registered capital, and related matters. Additionally, the Central Depository and Clearing Agency maintains the share ledger of publicly listed companies and facilitates the clearing and settlement of shares, including in the context of public takeovers. Croatian law further requires that all share transfer deeds for limited liability companies be certified as to content by local public notaries, with the Croatian language being mandatory, although bilingual deeds and documents are permitted.

In the vast majority of transactions, cash is the agreed form of consideration. The local legal framework provides availability for other types of consideration such as payment in shares or other non-cash considerations, but these options remain underutilised in practice. This is primarily because the transactions are predominantly structured so that the sellers are completely exiting the company or, if they remain, earn-out structures are put in place. Earn-outs are immensely popular when a private equity fund is the acquirer, although it is widely recognised that the earn-out structure often causes disputes between the parties.

In all M&A transactions, comprehensive legal, financial and tax due diligence constitute essential prerequisites for transaction progression. Environmental, social and governance (ESG) due diligence remains of limited application, as ESG principles have yet to gain significant traction in the local economy and are currently facing adverse headwinds from both the U.S. and EU, where certain ESG objectives are being gradually scaled back. In certain industries — such as pharmaceuticals, real estate or specialised manufacturing (e.g. defence) — buyers typically engage specialist advisers to conduct technical due diligence confirming compliance of production processes or products with applicable regulations. Real estate related transactions, particularly those involving hotel assets, frequently require specialist surveyor reports, valuations, and verification of zoning and planning compliance.

One topic increasingly discussed of late is access to market sensitive information in M&A transactions involving publicly listed target companies. Croatian M&A legislation lacks specific rules governing this area. Some provisions of the EU Market Abuse Regulation regarding insider trading and market sensitive information serve as guidelines for handling such information, supplemented by the limited practice of the local financial services regulator. However, practitioners generally agree that more explicit rules should be implemented. Lastly, the General Data Protection Regulation (GDPR) also imposes rules regarding disclosure of personal information in due diligence procedures, which requires additional paperwork and caution, particularly on the seller’s side.

The use of W&I insurance remains relatively uncommon, though there is a discernible trend toward increased adoption of this instrument. This is largely because PE funds are increasingly insisting on this coverage for breaches of W&I, whether they are on the buy- or the sell-side. It has also become evident that using W&I insurance increases both the costs and timeline for transaction completion. During transaction negotiations, using W&I insurance and the allocation of its costs is typically the first topic on which the parties spend a significant amount of time. Conversely, it is notable that sellers tend to be less demanding when negotiating fundamental representations and warranties, while remaining rigorous in negotiating warranties that fall outside the scope of W&I insurance coverage.

Until the end of 2025 Croatia was one of the last EU Member States to have not introduced the foreign direct investment (FDI) screening regime. Since October 2025, Croatia has implemented the FDI-screening regime by enacting the Act on Foreign Investment Screening (the “Act”). The main takeaways from the Act are the following:

• The Act applies to non-EU originated or controlled foreign investments in companies operating in critical sectors such as energy, health, defence, digital infrastructure and similar, as well as to any kind of concessions and PPP arrangements.
• Foreign investors must seek approval from the Ministry of Finance for investments involving the acquisition of 10% or more shares, voting rights or control in a company. The verification process includes administrative checks, risk assessments and collaboration with the European Commission and EU Member States.
• The Ministry of Finance may unilaterally initiate control procedures for unreported foreign investments or those deemed risky. If violations are found, the Ministry can revoke approvals and order the sale of shares or assets within a specified timeframe (no longer than nine months).
• The Act applies retroactively; the screening regime covers concerned foreign investments made three years before the Act entered into force, and the relevant investors are required to undergo the screening procedure as though their investments had been made after the Act came into effect.

One of the main challenges in the screening procedure is coordination among the various governmental bodies involved. This is, presumably, one of the main reasons as to why the screening procedure, as regulated by the Act, can be a time-consuming exercise, taking up to nine months.

Disclosures and announcements for public M&A transactions in Croatia are governed by two legislative acts: the Capital Market Act and the Takeover Act. The Capital Market Act imposes public announcement obligations whenever a person exceeds or falls below certain shareholding thresholds. The relevant thresholds are 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.

Under the Takeover Act, the acquirer must announce its obligation to initiate a public takeover procedure as soon as it has acquired, directly or indirectly, more than 25% of voting rights in the target company. Once the public offer is approved by the regulator, it must be announced on the stock exchange. Upon completion of the public takeover procedure, the acquirer must announce the final outcome of the offer, including the number of shares acquired and the percentage of voting rights held following completion of the public takeover.

Public takeovers are regulated by the Takeover Act, which establishes both procedural and substantive rules governing the mandatory and voluntary takeover bids. The main shareholding threshold, which triggers the obligation to launch a mandatory public offer, is 25%. As soon as this threshold is crossed (i.e. as soon as the relevant agreement is executed, regardless of transaction closing or actual transfer of title to shares), the obligation to launch a mandatory public offer must be publicly announced. Thereafter, the bidder must apply to the financial services regulator for the approval of the bid within 30 days from the date the obligation arose. If the transaction is subject to merger control approval or requires any other regulatory approval (e.g. from the central bank or securities regulator), approval of the bid will only be granted after all other regulatory approvals have been obtained (including Croatian approvals and, where applicable, approvals from other jurisdictions).

The regulator does not scrutinise the commercial terms of the deal between the bidder and the seller whose stake triggers the public offer, including break fees, exclusivity periods and similar provisions. The only point which is important is the price per share, which determines the minimum price that must be offered in the takeover. The price is set as the higher of:

• the price paid by the bidder within one year prior to the date on which the bid obligation was triggered; or
• the average share price on the stock exchange in the period of three months before the same date (provided that the relevant shares were traded on at least one-third of available trading days during that period).

Once the bid is formally approved, the acceptance period is 28 days, which may only be extended if a competing bid is announced during this period. The bid must extend to all outstanding shares, and the bidder must provide collateral for the payment of all outstanding shares, either in the form of a bank guarantee or as cash collateral. The bidder is not allowed to set any conditions on the acceptance of the offered shares except in the case of a voluntary public offer, where the bidder has the right to impose a “success threshold”.

The regulator and the legal framework governing public takeovers are primarily focused on protecting minority shareholder rights. This is reflected in the minimum price rule described above, as well as in certain protective measures applicable following completion of the public takeover. If, within one year of completing the mandatory public offer, the offeror acquires target shares at a price higher than that offered in the public takeover, the offeror must pay the difference to all shareholders who accepted the offer. If the majority shareholder holds at least 95% of voting rights in the target company (this threshold is calculated separately for ordinary shares and preferred shares, if applicable) following completion of the takeover, it may initiate squeeze-out proceedings against the remaining minority shareholders. If the squeeze-out is initiated within three months of completing the public takeover, the price to be paid to minority shareholders will be the price from the takeover process. Conversely, minority shareholders also have the right to request a sell-out if the bidder does not initiate the squeeze-out within this three-month period.

Foreign investors almost invariably require arbitration as the preferred forum for M&A disputes. This preference stems from the international nature of the arbitration as well as the ability to select arbitrators from various jurisdictions and with expertise best suited to the subject matter of the dispute. The place of arbitration is often in some third jurisdiction; that is, neither in Croatia nor in the jurisdiction where the foreign buyer or seller is domiciled. Parties frequently incorporate pre-arbitration conciliation procedures to facilitate amicable resolution before the dispute is brought to arbitration. Litigation before Croatian courts is the second most common option and is particularly prevalent where all parties to the transaction are Croatian entities.

A key aspect of ensuring accurate and reliable foreign direct investment compliance is the deployment of IT solutions to gather information from various ultimate beneficial ownership registers and company houses, which maintain records accessible to screening authorities and enable them to identify potential non-EU elements in ownership structures of potential investors. Furthermore, local authorities are establishing close cooperation with their counterparts in other EU jurisdictions, which investors should consider to ensure consistency between their disclosed ownership structures and information already available in those jurisdictions. Gathering such extensive information for clients during the preparatory phase of an investment from various sources across the EU and other jurisdictions would not be possible without the advanced use of IT technologies, including artificial intelligence.

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