Even in times as uncertain as today, M&A transactions are an ever-present element in the growth of Polish organisations, but it is crucial to have a clear investment strategy in place and to analyse risks. These are some conclusions from four panel discussions at the IV CRIDO M&A Forum held on 19 October 2022 at Hotel Warszawa.
Together with 150 entrepreneurs, PE funds, Warsaw Stock Exchange (GPW) representatives, Polish Private Equity and Venture Capital Association (PSIK) representatives, economists and banks we discussed prospects for the M&A market in the near future in the current geopolitical and economic context as well as factors determining the success or failure of M&A transactions.
An introduction to panel discussions was provided by Ignacy Morawski, Chief Economist at Puls Biznesu and SpotData director. Mr Morawski presented macroeconomic data on interest rates, inflation, and the ratio of stock prices to GDP. It followed from his presentation that Polish companies were ready for foreign acquisitions and new investment plans were to be expected as a result.
Polish businesses ready for foreign acquisitions
The presentation of macroeconomic data was a prologue to a panel discussion on Poland’s economic outlook in the coming year and going forward. Several conclusions emerged from the debate between Warsaw Stock Exchange President Marek Dietl, Innova Capital Senior Partner Krzysztof Kulig, Puls Biznesu Chief Economist Ignacy Morawski, Analysis+Digital Transformation Area Managing Director and Pekao S.A. Chief Economist Ernest Pytlarczyk, and CRIDO Managing Partner Andrzej Puncewicz:
- the market proved capable of adapting to changing conditions: it always seeks equilibrium following a shock;
- fewer deals in 2023 seemed obvious, while the situation going forward would be determined by the prospects for an end to the war and inflation expectations;
- inflation and real interest rates were key factors affecting business in the long term;
- macro data indicate that Polish organisations were ready for more acquisitions abroad;
- there was visible significant potential for M&A activity in the IT, technology, and digitalisation-related industries;
- considerable potential for acquisitions was evident in the family business segment.
Key role of a clear investment strategy as banks take a more restrictive approach to financing deals
The next panel discussion, featuring PSIK Vice President and Accession Capital Partners Managing Partner Przemysław Głębocki, International Finance Corporation Country Advisor Piotr Matczuk, Resource Partners Managing Director Wojtek Pociecha, Bank Pekao S.A. Director and Head of the Structured Finance Team for Strategic Clients Łukasz Radkowski, and CRIDO partner in charge of financial due diligence in the M&A team Jacek Ostrowski, focused on the financing sources for transactions. The panellists agreed that:
- regardless of the industry, an innovative and forward-looking approach on the part of organisations was a competitive advantage that is especially important in difficult times;
- the availability of capital (especially from banks) was currently limited and the banks' approach was more restrictive, but obtaining financing was still possible;
- the key, however, was to have a well-prepared and clear investment strategy as well as a vision how to build the company's value based on acquisitions;
- the growing demand for "mission" financing offered by the IFC/World Bank also resounded in the discussion.
Transaction do not end with a signed contract
The panel on the practical aspects of the transaction process featured General Counsel and Head of Legal Department at Dentsu Polska Ewa Markiewicz, Partner at Abris Capital Partners Wojciech Jezierski, Country Manager Poland, CEO & COO at Kiwa Inspecta Polska Paweł Smoleń, and CRIDO Partner responsible for tax advisory in the M&A team Mateusz Stańczyk and was moderated by Przemysław Furmaga, CRIDO Partner responsible for legal advisory in the M&A team. During the debate, the experts pointed out that:
- the key to a successful transaction was to create a simple transaction structure that should be flexible in the context of a changing legal and tax environment;
- the relationship between the parties in a transaction and communication based on mutual trust were crucial in M&A deals;
- it was very important to set a clear goal with which a given transaction should be approached, while the process of post-deal integration was best planned carefully already at the transaction stage.
Quick and agile measures are key to successful M&A transactions
The last panel, devoted to the “what, when and how” of consolidation, featured the following speakers: Dr. Irena Eris S.A. CEO and Vice President of the Management Board Irek Sudnik, Asseco Poland Vice President Marek Panek, LUX MED Acquisition and Development Department Director Bartosz Wisniewski, and CRIDO Managing Partner responsible for Corporate Finance in the M&A team Artur Marszałkiewicz. The panellists pointed out that:
- acquisitions were a natural element of any organisation’s growth;
- in light of growing inflation, transaction processes were approached with a degree of caution, which made proper risk assessment crucial;
- the transaction process involved quick and bold decisions on the one hand and significant care and diligence on the other;
- cooperation and a trusted transaction team were the key to a successful transaction.
CRIDO’s M&A team supports our clients in all or selected areas of the transaction process: corporate finance, due diligence (financial, tax, legal), developing transaction structures, drafting transaction documentation, as well as legal and tax consulting at every stage of the transaction.