Poland ranked first in Central and Eastern Europe in 2020-2022 both in terms of the number of M&A transactions and their value, according to a study by KPMG in Poland titled “Characteristics of transaction processes in Poland. “Characteristics of transaction processes in Poland.” The value of transactions in 2022 reached its highest level in a decade – 74.9 billion PLN. The most attractive for investors in Poland will be the new technology sector.
In Central and Eastern Europe, Poland was once again the largest M&A market in 2022. Despite a number of macroeconomic challenges, our market proved strong enough and resilient to turbulence related to inflation or energy prices. The value of transactions reached its highest level in a decade – 74.9 billion zlotys, an increase of one-third compared to 2021. In 2022, the Polish market saw more than 340 M&A transactions. The energy market proved to be the most attractive for investors in the CEE region. Five of the nine largest M&A transactions in the energy and utilities sector in this European region were carried out in Poland, KPMG reported.
Investment motives vary by investor type. Among strategic investors, 40% of respondents ranked the acquisition of a customer portfolio/distribution channel as the top investment motive, and the acquisition of a product/service portfolio ranked second. For financial investors, the key motives are profit from a planned resale and industry consolidation within their investment portfolio – indicated by more than half (57%) of respondents.
The average transaction value declared by respondents differs for the two types of investors. In the group of strategic investors, for almost half of the transactions carried out it is less than PLN 100 million, while 16% exceed the amount of PLN 500 million. One-fifth of respondents admitted that they had not completed any transactions in the last three years. It is worth noting at this point that the period taken into account was the one beginning when the first months of the coronavirus pandemic occurred. Respondents from the financial investor group were most often (43% of indications) involved in transactions whose value was in the range of PLN 50-100 million, KPMG further reported.
The time it takes to complete an M&A transaction on the Polish market from the date of first contact to the time the SPA is signed takes an average of 10 months. The difference in time can be influenced by a number of factors, such as the complexity of the transaction or the number of stages that precede its finalization. Comparing the current results of KPMG’s survey in Poland with those of 2019, it can be seen that the maximum time required to complete an M&A transaction for both strategic investors (from 14 to 36 months) and financial investors (from 11 to 24 months) has increased.
“Since the COVID-19 pandemic, M&A transactions have been conducted in a much more volatile environment. Each successive year brings new challenges, and the success of a deal depends to a large extent on the determination of the parties to execute the transaction (including acceptance of price levels that deviate from original expectations and levels from several years ago) and on seeking transaction instruments (e.g., earnout mechanisms) that facilitate such an agreement. It is difficult to expect that the transaction environment will noticeably improve and stabilize in the near future, and therefore entities considering the sale or acquisition of a company should carry out their plans and not postpone them,” stressed partner, head of the Mergers and Acquisitions Team in the Deal Advisory Department at KPMG in Poland Tomasz Pasiewicz.
According to respondents of the KPMG survey in Poland, the construction and real estate markets were most negatively affected by inflation (55% of responses). Retail and wholesale trade (53%) and tourism, catering and hospitality (52%) ranked second and third, it also indicated.
The macroeconomic environment and the possibility of a recession in the coming months are likely to negatively affect the M&A market, but in the medium term the outlook is more optimistic. Mature companies (78% of indications) and organizations in the growth phase (57%) will be of greatest interest to investors in terms of potential M&A transactions in the near term. On the other hand, the most attractive in terms of planned M&A transactions is the new technology industry (47% of indications). In the coming months, many transactions can also be expected in the e-commerce, IT, healthcare and renewable energy industries, KPMG reported.
Further development of the M&A market will depend on the availability of raw materials, energy prices, inflation and the implications of the still ongoing war in Ukraine. In view of changes in the economic environment, according to survey respondents, there is a growing role in M&A processes for the quality of executives in adapting the company to unpredictable events (89% of responses) and the availability of employees with relevant industry experience in the labor market (76% of respondents). 75% of both strategic and financial investors have high hopes for modern technology for conducting production/service provision and for aligning companies’ operations with ESG criteria.
Source: KPMG and ISBnews
