Small and medium-sized enterprises may become the main targets of investor acquisitions in the near future due to an increasingly restrictive regulatory environment and persistently high interest rates, according to lawyers at Baker McKenzie. Despite the complex geopolitical situation and its associated risks, the Polish mergers and acquisitions market remains stable.
Last year, the total value of mergers and acquisitions worldwide fell by 17% to $2.9 trillion, and the number of transactions decreased by 5% to 56,700. The downturn was due to an uncertain macroeconomic situation and high inflation, which translated into an increase in the cost of financing investments. Regulatory and legal factors are increasingly affecting the market condition, Baker McKenzie lawyers claim.
“The situation in the mergers and acquisitions market is extremely complex. In addition to still high interest rates, we are observing increasing activity by regulatory bodies, mainly in the area of competition protection,” says Tomasz Krzyżowski, a partner at Baker McKenzie’s Warsaw office. “This is particularly true for the technology sector and industries with a high level of consolidation, where undoubtedly every major transaction will be closely monitored.”
Baker McKenzie lawyers point out that regulatory considerations, including merger control, foreign investment conduct, and the new European Union regulation on foreign subsidies (Foreign Subsidies Regulation – FSR), are becoming a significant factor in making decisions about company acquisitions. This is especially true for investors from outside the EU.
Geopolitical tensions that have intensified in recent years also significantly impact the mergers and acquisitions market. Trade wars, economic, technological, and military competition between countries result in an increasing number of regulations in the area of foreign investments.
“Security and public order issues are playing an increasingly significant role in EU regulatory and trade policy. Growing distrust of capital from a competing country or bloc leads regulators to introduce regulations aimed at protecting native, strategically important companies,” says Weronika Achramowicz, managing partner at Baker McKenzie in Warsaw. “Regulatory bodies are focusing primarily on technology companies, especially those related to defense technology, space, or artificial intelligence solutions. Regulatory and compliance issues are gaining a new, previously unseen dimension in the transactional context.”
A key factor driving mergers and acquisitions transactions remains the need to adapt and scale business operations in the face of changing market conditions and technological progress. Another issue is the growing demand for technologies and services related to implementing sustainable development policies.
“Companies that can offer innovative solutions or whose operations align with the concept of sustainable development become attractive acquisition targets. Many companies and investors are interested in purchasing assets or technologies that will help them transition to cleaner and more environmentally friendly energy sources,” says Łukasz Targoszyński, a partner at Baker McKenzie’s Warsaw office.
“Polish companies may also become attractive acquisition targets for investors interested in moving production closer to the final customer, as well as due to the expected economic revival and improved financial results associated with the increased inflow of funds from EU aid programs, including the National Recovery Plan,” concludes Filip Uziębło, a partner at Baker McKenzie in Warsaw.
Baker McKenzie lawyers expect increased interest from international private equity funds in investments in Poland, particularly in the areas of infrastructure and renewable energy. Assets that are resilient to macroeconomic turmoil and provide stable growth, such as companies in the healthcare sector, remain attractive acquisition targets.
