Media | 26.04.2023

Is the transactional market blanketed with fog? The article published at Legal Business Polska

Transactional shift. Will the economic climate be favourable?

Looking from the perspective of the recent economic and political situation, it is not difficult to be sceptical about the development of the M&A market in our region. Just after the outbreak of the SARS-COV-2 virus pandemic in April 2020, we wondered whether it would trigger a forced transactional quarantine. Two years later, everyone’s attention was occupied by the Russian military aggression against Ukraine and its potential impact on the transactional market in Poland. And in 2023 we are likely to face turbulence in the banking sector.

These sudden and unpredictable factors have affected both the decisions of investors, who are taking a more cautious approach to launching new projects, and the transactions themselves in terms of the level of security for their participants.

Although 2022 was a record-breaking year for the transactional market in Poland, the prospects for this year no longer seem so optimistic. At the same time, we believe that we are far from the transactional quarantine that took place in 2020.

Analyses made in the context of the number and type of transactions carried out in 2022 indicate that Poland was the main M&A market in the CEE. The value of transactions in our country reached its highest level in a decade, despite a 20% decrease in the value of transactions in the region, compared to the previous year.

Despite the current economic and geopolitical situation in the region, Poland’s economy is still recession-proof. Our country’s strategic position in the CEE and the competitive advantages it has developed, including a diversified economy and a strong labour market, continue to make it an attractive market for investors, including the foreign ones.

The strengths of our region are confirmed by MFW Fiałek’s clients, including Luc Albinski, Executive Chairman at Vantage Capital, a private equity fund based in Johannesburg (South Africa), who, with the support of our law firm, invested in a chain of bilingual educational institutions in Poland. The incentive for the investment was the perception of our country as the largest market in the CEE, both in terms of population and the corresponding level of GDP. It is worth mentioning that Vantage Capital also considered other large markets in Europe, including Turkey, but the investment risk proved to be much higher and the obstacles to foreign investments in the education sector discouraging.

When making the investment decision the fund also recognised that the strong interest in the premium educational product offered in Poland was competitive with other European regions. It noticed the social assets of our country, such as the appreciation of the need to be fluent in foreign languages, the openness of Poles to travel, study and work abroad.

Will the future reconstruction of Ukraine increase investments in our region?

The Russian military aggression against Ukraine has highlighted yet another potential driver of investment growth in Poland. It is estimated that Ukrainian companies have so far lost at least USD 100 billion in physical damage and lost profits during the Russian invasion. Foreign companies have also suffered. The U.S. Chamber of Commerce, which represents 600 US and international companies in Ukraine, reports that 22% of its members have factories or facilities that have been damaged. This undoubtedly means that once the war is over, some entrepreneurs will sell their businesses and others will attract investors.

Ukraine’s proximity in terms of logistical support, still attractive local costs and competitive advantages position Poland as a safe foothold for investors and thus a natural location for investments, not only in the arms industry, but also in public and private, energy, transport and medical infrastructure. Poland is the new home for many Ukrainian companies that have relocated their operations to our country because of the war. Furthermore, the facilitations for Polish companies operating in Ukraine during the reconstruction of the country announced by the Ukrainian government, including the treatment of Polish companies on the same terms as the Ukrainian ones, open up much wider opportunities to operate on better conditions than for the companies from other EU Member States.

It is estimated that investors and international companies will inject up to USD 350-500 billion in industrial, infrastructure and real estate projects as part of the future reconstruction of Ukraine. Advising international investors looking to invest in Ukraine certainly represents a real opportunity from the perspective of the transactional market development in the years to come.

What current and new regulations do the investors need to consider for transactions?

Regardless of the economic and geopolitical situation in Poland, foreign investors, including private equity funds, need to pay attention to the current and future requirements for their intended investments in Poland, including the best practices in this regard. Failure to comply with these requirements may even lead to the cancellation of the entire transaction.

One of the market standards is that an investor conducts a due diligence review to better understand the target and identify potential legal risks. An increasing number of investors, especially the foreign ones, consider ESG as a key factor for financial success and therefore the entrepreneurs will face increasing scrutiny and pressure for transparency in the areas of climate risk, social justice, sustainability and corporate governance. Undoubtedly, ‘green’ due diligence reviews will grow increasingly popular in the Polish market and will eventually become the standard for conducting due diligence reviews.

In addition, in many transactions investors must also take into account the need to obtain various approvals or permits that will affect the effectiveness of the transaction. These are primarily: (i) clearances from the President of the Office of Competition and Consumer Protection for intended concentrations of undertakings, including the acquisition of control over companies operating in Poland; (ii) approvals of the minister of the relevant government administration office or the President of the Office of Competition and Consumer Protection with respect to the intended transactions involving companies operating in various sectors of the Polish economy, especially in the sectors of strategic importance, carried out in particular by the entities from outside the European Union, the EEA and the OECD.

In addition, the new EU regulation on subsidies granted by third countries (the Foreign Subsidies Regulation) will take effect in mid-2023. This regulation requires investors to notify and obtain approval from the European Commission for an intended concentration if the investor in question has received non-EU state aid in excess of certain limits and intends to undertake a concentration of undertakings, including the acquisition of control over companies operating in the EU, including in Poland.

How have we increased the number of international clients in these difficult times?

In order to close a transaction efficiently, effectively and, above all, safely, nowadays the investors need to pay even more attention to the selection of specialised legal advisors. It is very important that the legal team leading the transaction is highly competent and has very broad transactional experience covering both the legal issues and the business environment.

In 2022 our law firm experiences a remarkable period of transactional activity, reflected in a record number of more than 50 ongoing transactions. We also noted a dynamic increase in the number of international clients from Europe, the United States of America and Africa investing in Poland and considering investments in the neighbouring countries.

The reason for this success is certainly our attention to the high quality of both the transaction documents and the handling of the transaction by our experienced and competent team. International clients, especially those transacting for the first time in Poland, appreciate not only our knowledge of the principles of the local transactional market, but also our high responsiveness and effective communication. We want to be not only their legal advisors, but also a trusted business partner in their investments.

Our transactional focus and high activity in the M&A market have made us one of the first choices as legal advisors for foreign private equity funds and international strategic investors investing in Poland. We are happy that our clients keep coming back and appreciate our unwavering dedication to perfecting our services.

Author: Rafał Siemieniec, Associate Partner at MFW Fiałek

This article was published on 26 April 2023 at Legal Business Polska ( (originally in Polish)