During the last two years, as has consistently been the case over an extended period, the M&A market in Poland has been dominated by strategic investors, who on a buy-side accounted for 68% of all the 344 transactions recorded to be driven by both financial sponsors and strategic buyers in 2024 . Financial sponsors, mainly private equity (PE) including venture capital (VC) funds, accounted for the remining 32% of such M&A transactions in Poland in 2024.

2025 follows the same trend and consequently is likely to be approaching the peak in the involvement of financial sponsors on buy-side of M&A transactions in Poland, with such involvement ranging in the period of last 15 years from 19% to 35%.

Of financial sponsors’ investments, the largest share in Poland is attributable to buy-out private equity funds, which accounted for approximately 80% of all investments made by private equity in 2024 in Poland . Despite the market being dominated by strategic investors, private equity remains crucial, as funds frequently engage in high-profile, high-return transactions, drive modernisation and scaling of portfolio companies, increasingly participate in secondary buyouts and actively invest not only in leading targets but also in the small and medium-sized enterprise (SME) sector.

The resurgence in financial sponsors’ activity, especially in large-scale inbound M&A transactions that were less visible from 2022 through early 2024, stems from an improving macroeconomic environment and easing monetary policy. Another contributing factor was improved sentiment towards the region among global investors, who increasingly recognise that the war in Ukraine does not necessarily pose material threats to neighbouring countries.

These factors have restored funds’ ability to close transactions and, more recently, to leverage deals with a view to realising profits in a mature and yet higher-return market that the Polish economy offers.

Concurrently, the M&A market is fuelled by the structural necessity of succession planning within private companies and the ongoing consolidation of multiple fragmented sectors, which together provide a steady supply of M&A activity in the private equity sector.

Looking forward, the role of financial investors in Poland is set to expand. The private equity sector is mature, yet in terms of its relative size – being less than 0.2% of Poland’s GDP – it remains not only far behind well-known PE jurisdictions such as Sweden (1.36% of GDP) or UK (1.06% of GDP), but also the EU average (0.55% of GDP).

A stable pipeline of targets is driven by persistent succession requirements within SMEs in Poland. Furthermore, new regulations, such as the Polish Family Foundation Act, are stimulating the growth of family offices, which are emerging as agile co-investors. The sector will also receive a significant boost from the “Innovate Poland” programme, designed to inject PLN 4 billion (around EUR 944 million) into the market . These elements suggest that, despite their current minority share, the strategic importance of financial sponsors is being reinforced by new capital flows and supportive regulatory frameworks.

The Polish economy is still largely based on mid-sized, usually family-owned firms operating across various industries.

For that reason, the local M&A landscape is divided between PE and strategic buyers who see opportunities to expand through acquisitions of targets established by founders in Poland. The latter group of investors focuses on synergies and consolidation within the buyer’s group, rather than on value creation and exit strategies typical of PE. As a result, mechanisms such as earn-outs are not as common when the buyer is an industrial investor. At the same time, instruments initially developed for PE deals, such as (W&I) insurance, have become popular and are now successfully used in M&A transactions even without participation of financial investors. Nonetheless, from a legal perspective, the terms of transactions are generally similar in both PE deals and those involving sector investors.

The procedure for acquiring shares depends strictly on the legal form of the target entity, with the most common form in the Polish private sector being a limited liability company (spółka z ograniczoną odpowiedzialnością). In this case, an effective transfer of shares requires a written agreement with signatures notarised by a notary. Failure to comply renders the transaction invalid. The need for notarisation can create practical complications, especially when a foreign entity is involved. After signing the agreement, the parties must notify the company and provide proof of the share transfer, which requires the management board to update the share register and report the changes to the National Court Register (Krajowy Rejestr Sądowy). Different rules apply to joint-stock companies (spółka akcyjna), where notarisation of signatures is not required. Ownership changes must be recorded in the shareholder register and this entry is constitutive, meaning it is essential for acquiring rights.

The share transfer process also involves fiscal obligations, under which the buyer must pay a civil law activities tax amounting to 1 % of the market value of the acquired shares.

Certain transactions in the Polish market involve partnerships (spółki osobowe), as running a business in this legal form has traditionally been a tax-friendly structure. Polish law allows the acquisition of interests in partnerships directly from partners, so acquisitions of partnerships are, to certain extent, similar to typical share deals involving LLCs and joint-stock companies. At the same time, by nature, partnerships are not vehicles incorporated with the aim to built value and divest, so it is often expected by buyers, – particularly PE firms – that prior to completion of the deal, the partnership is transformed into an LLC or a joint-stock company.

In Polish transaction practice, financial sponsors operating through limited liability project companies typically address the lack of assets in the purchasing entity by providing representations regarding the source of financing. If the sell-side is not comfortable in this respect, financial sponsors often offer guarantees from a group member with a stable financial position. The specific form of comfort is determined by the source of capital. In deals funded by the sponsor’s own resources, funds utilise equity commitment letters. In leveraged buyouts (LBOs), they rely on debt commitment letters to demonstrate the availability of external financing. Furthermore, while Polish law permits the use of reverse break fees to compensate sellers for failed transactions – such as those resulting from financing failures or regulatory blocks – these are not a widespread market standard. When negotiated to limit buyer exposure or penalise pre-closing covenant breaches, these fees typically range from 1% to 10% of the transaction value, though they remain the exception rather than the rule in the local market.

On the Polish M&A market, the completion accounts mechanism dominates alongside the locked box pricing mechanism. Out of the two, the completion accounts mechanism is more common. In recent years, EBITDA-based earn-out and kickback clauses have become more frequent and, although still not a standard, buyers increasingly expect that part of the consideration depends on the target’s future results, which should not come as a surprise.

The decision on which mechanism to apply depends on several factors, with the nature of the target’s business being the most significant.

The locked box mechanism is primarily used in transactions involving entities with a stable financial condition. It is preferred when the target company generates predictable financial results and has historically verified cash flows. This stability allows the parties to set the price based on historical data (the so-called locked box date) with reasonable certainty, minimising the risk of significant value fluctuations between signing and closing. For financial sponsors, price certainty at the signing stage is crucial, as it enables planning of debt financing and avoids lengthy disputes over price adjustments, which sometimes accompany the completion accounts method. When using the mechanism, negotiations focus on precisely defining leakages. The parties must clearly specify in the SPA which cash outflows from the company to the seller (or related entities) are prohibited during the interim period.

On the other hand, the completion accounts formula allows the parties to determine the actual value of the target at closing or another agreed reference date. In that sense, it is the most objective mechanism, enabling a “debt-free, cash-free” consideration and putting pressure on sellers to maintain pre-agreed normalised working capital. This formula is particularly common in transactions involving production entities, where working capital and inventory levels are often key factors in calculating the actual value of the acquired company.

Locked box is favoured by private equity funds when divesting, as opposed to completion accounts, which are typically expected by PE firms when acquiring targets, especially in deals involving family-owned companies.

As Polish law does not provide statutory warranty that could be considered as suitable for M&A transactions, M&A practitioners deploy a sophisticated array of contractual mechanisms to allocate risk, which are similar to those in other jurisdictions.

This approach begins with pricing structures where the “locked box” model favours sellers by transferring economic exposure at a pre-closing balance sheet date, contrasting with “completion accounts” which shield buyers by adjusting for working capital and net debt fluctuations at closing.

In the realm of representations and warranties – typically provided by selling shareholders rather than management – sellers mitigate exposure through liability caps (market standard 10-30% for business warranties, 100% for fundamental title), de minimis thresholds and baskets, which may function as tipping mechanisms or deductibles. Further protections include time bars (typically 12-36 months for general claims and six years for tax or environmental matters), anti-sandbagging clauses and exclusions for changes in law, although covenants generally remain uncapped. Conversely, buyers secure their position through specific indemnities covering known due diligence risks uninsurable by W&I policies, earn-outs to address valuation uncertainty regarding future performance and MAC clauses.

The increasing popularity of W&I insurance has fundamentally reshaped risk allocation, particularly for private equity stakeholders whose approach is situationally asymmetric. When exiting, PE sellers prioritise a “clean exit”, strictly refusing escrows or holdbacks and requiring buyers to procure W&I coverage while capping the seller’s recourse liability at a nominal EUR 1. However, when acting as the buying party, these same financial investors adopt a conservative stance, routinely demanding holdbacks or escrow accounts to secure liquidity for potential post-closing warranty breaches and price adjustment disputes.

W&I insurance has become increasingly common, displacing traditional escrow accounts and other forms of deposits due to the capital lock-up associated with them. We observe a growing interest from investors in taking out such policies, which are increasingly recognised as an essential investment protection tool for both buyers and sellers. In Poland, this practice was pioneered by private equity funds prioritising the rapid release of capital following an exit. Policy limits depend on the specific circumstances of the target, the corresponding scope of representations and warranties and the applicable coverage periods for individual R&W categories. However, in brokers’ practice, a typical starting point for further consideration and party discussions is in the range of 30–50% of the target’s enterprise value (EV). Carve-outs and exclusions are similar to those in other jurisdictions. Underwriters are particularly cautious regarding environmental, tax and cybersecurity warranties. The typical cost of insurance ranges from 1–2% of the policy limit.

Out of roughly 500,000 companies registered in Poland, only slightly more than 400 is listed on the Warsaw Stock Exchange or abroad.

In recent years the Polish capital market has undergone a transformation, with a trend of companies withdrawing from stock exchange trading rather than starting new listings. Since 2020, 3-5 IPOs take place at the Warsaw Stock Exchange each year. De-listings although more frequent, still occur in modest numbers, particularly in voluntary processes.
Public-to-private transactions, involving a tender offer and subsequent delisting, often take place with the participation of financial sponsors, as this buyer class is highly sophisticated and able to tackle the complexity of the process.

In relative terms, public-to-private transactions are very infrequent compared to the total of 110 transactions that took place in Poland in 2024 with the participation of financial sponsors on the buy side. Several public-to-private transactions recorded in recent years, often involving well-known companies, have made the tender offers and delisting processes more visible in the market. The motivators for these actions included a drive to avoid rising regulatory costs and pressure on short-term results, which allows for more effective restructuring outside the public market, as well as, in some cases, a disparity between low market valuations and the fundamental value of the enterprises. In terms of sectors, financial sponsors’ activity was visible in the TMT industry (technology, media, telecommunications), the industrial sector and consumer goods.

The key to the success of tender offers proved to be the level of the offered premium – transactions accounting for a significant surplus over the stock price were more likely to succeed, unlike takeover attempts without an attractive premium. The most effective operating model proved to be cooperation with founders or other major shareholders, creating alliances that allowed for the efficient withdrawal of the entity from the stock exchange. The model for exiting investments also changed, with sales to strategic investors becoming more popular as the IPO channel became marginalised.

The investors operating in Poland must navigate a complex tripartite framework of investment controls in addition to standard merger clearance, encompassing EU-wide subsidy regulations, national security screening and specific real estate restrictions. At the supranational level, the EU Foreign Subsidies Regulation (FSR) imposes a mandatory notification regime and standstill obligation for transactions where parties have received substantial financial contributions from non-EU countries.

Domestically, Poland enforces a strict Foreign Direct Investment (FDI) screening mechanism under the Act on Control of Certain Investments, covering two comprehensive regimes: the sensitive sectors regime and the strategic entities regime.

The sensitive sectors regime protects domestic entities in strategic sectors – ranging from energy and telecommunications to software development for essential services – provided that their turnover is in excess the de minimis limits set under the law (i.e. amounts to more than EUR 10 million generated by a Polish entity in the territory of Poland in each of the last two financial years), against takeovers by capital originating outside the EU, EEA or OECD. As a rule, the identification of the ultimate beneficial owner (UBO) is decisive; if the UBO falls outside this “safe harbour” and the de minimis turnover limit is exceeded, obtaining clearance is a mandatory condition precedent.

The strategic entities regime protects entities operating in one of the strategic sectors and listed as strategic entities by the Council of Ministers (as periodically updated). Any acquisition of more than 20% of shares, votes or economic rights in the listed entities, regardless of the acquirer’s domicile, requires clearance from the relevant authority.

Furthermore, real estate regulations create significant hurdles for share deals. Non-EEA investors acquiring control over a Polish company possessing any real property must obtain a permit from the Minister of the Interior and Administration (MSWiA). This requirement extends to indirect acquisitions and carries the sanction of transaction nullity, often necessitating prolonged closing timelines. This is distinct from the agricultural land regime, where the National Support Centre for Agriculture (Krajowy Ośrodek Wsparcia Rolnictwa) holds statutory pre-emptive rights over shares in companies owning agricultural plots exceeding specific size thresholds.

Consequently, investors must frequently structure deals as conditional agreements to accommodate these pre-emption rights, even if the target entity does not conduct agricultural activities, making real estate due diligence a critical component of the risk assessment process.

From the perspective of Polish competition law, the risk regarding merger clearance in transactions involving a financial sponsor is managed primarily through appropriate transaction structuring and a precise analysis of the notification obligation. Market standard dictates the inclusion of a condition precedent in the Share Purchase Agreement (SPA), making the closing of the transaction conditional upon clearance from the President of the Office of Competition and Consumer Protection (UOKiK), with parties typically committing to close cooperation throughout the merger review proceedings. A significant challenge for private equity funds lies in the specific rules for calculating turnover, which require aggregating the turnover of all portfolio companies within the investor’s capital group; this often automatically triggers a notification requirement even for relatively minor acquisitions. Moreover, the question of exerting control or co-control requires in-depth contractual structuring and analysis to confirm or rule out a Polish merger filing.

Nevertheless, in cases involving the establishment of a JV, this risk is increasingly assessed and mitigated through the lens of the “effect on Polish territory” doctrine. As indicated by recent legal interpretations and decisional practice regarding extraterritorial joint ventures, the lack of an actual impact on the Polish market may exempt an investor from the notification obligation, even if statutory turnover thresholds are formally exceeded. Consequently, the management of merger control risk is evolving from reliance on simple contractual clauses toward advanced pre-transaction analysis aimed at demonstrating the absence of local effects (in cases of JVs). This approach allows for the avoidance of protracted proceedings before UOKiK and eliminates regulatory uncertainty, particularly where financial sponsors establish global holding structures that possess neither assets nor direct turnover in Poland.

Private equity buyout funds in Poland typically acquire controlling stakes, usually targeting 100% of the fully diluted capital. In instances where financial sponsors take minority positions, these are mostly structured as equity investments safeguarded by shareholders’ agreements or co-investment arrangements. These agreements ensure minority protection through veto rights over essential corporate actions – such as amendments to constitutional documents, restructuring events, changes in the share capital or changes to the business scope – as well as deadlock resolution mechanisms and exit options like tag-along and drag-along rights or put and call options.

In addition, there has been a distinct increase in the prevalence of continuation fund vehicles and GP-led secondary transactions. Following the outbreak of COVID-19 and the onset of the war in Ukraine, these structures have become increasingly common as an alternative deal type. From a legal perspective, these transactions are subject to the same regulations as those applying to general funds and regular private equity transactions.

All the models are visible in the market. They include ESOP programmes, sweet-equity options and buy-backs of own shares by the target company, with shares subsequently awarded to management or founders.

Opportunities are also evident for founders who serve as management teams and often contribute significantly to the target company’s value proposition. These founders may reinvest transaction proceeds or roll over retained equity into the buyers’ transaction vehicles or holding companies that execute the acquisition.

The most popular structure is a dual arrangement, where part of the remuneration is paid to managers under their appointment to the management board, with a significant portion paid under a B2B arrangement (consultancy fees subject to preferential fixed taxation terms with limited social security contributions). Any bonuses paid under the incentive plans would be treated as additional remuneration under the B2B contract. Such a split arrangement is not without tax risk (for both the company and the individual) and should be planned carefully. Specifically, where possible, the B2B contract should be signed with an entity other than the one where the individual serves as a management board member. If this is not possible and the B2B contract is signed with the same company, the scope of activities covered by B2B contract should differ significantly from the duties of a management board member.

The management may also participate in incentive schemes based on shares offered in foreign holding companies. Depending on how such schemes are structured and the individual’s relationship with local entity, taxation of profits from the sale of shares could be postponed until the moment of disposal and taxed at the rate of 19% for capital gains (rather than at progressive tax rates with social security contributions).

The management board members are usually subject to non-compete clauses in their management contracts. The duration of such non-competes varies and usually depends on the level of know-how, the position of the employee and the scope of the company’s business. Generally, the duration period does not exceed one year after the termination of management contract.

Nevertheless, it is legally required for management board members to act in favour of the company they manage. Breach of this obligation may result in liability for damages in accordance with the Commercial Companies Code.

Simultaneously, the Commercial Companies Code imposes an obligation on the management board member to obtain the company’s consent in order to engage in competitive activities while serving as a management board member of the company.

The provisions in the articles of association typically contain a catalogue of actions requiring a resolution on certain matters or the consent of a specific corporate body (e.g. shareholders’ meeting) or a specific entity. Another common way to ensure control over material business decisions is by concluding a shareholders’ agreement, which is a contract between the shareholders of the company and, unlike the articles, is not publicly available. Such agreements often include more sophisticated and detailed provisions on governance.

Maintaining control is usually achieved through veto rights on key corporate decisions, such as changes to constitutional documents (articles of association), restructuring, increases or decreases in share capital or modifications to the business scope, alongside mechanisms for resolving deadlocks and exit provisions, including tag-along and drag-along rights as well as put and call options. In some cases, financial sponsors are vested with a right to appoint management or supervisory board officers. Depending on the nature of the target and negotiation position of the sponsor, such a right can be exercised if certain events of default occur in relation to the target, under the shareholders’ agreement or regardless on any conditions.

Since the participation of management board members as minority shareholders in investment structures alongside private equity funds is uncommon in transactions on the Polish market, instruments such as management pooling vehicles are not common .

In the Polish jurisdiction, the debt financing landscape is distinctly segmented by the target’s growth stage and capitalisation size. For early-stage and small capital financings, private debt is the predominant source of leverage. A significant development in this segment is the increasing popularity of convertible instruments, particularly Convertible Loan Agreements (CLAs). These are commonly used in bridge financing rounds, allowing investors to inject liquidity while deferring complex valuation negotiations until a subsequent equity round. As companies progress beyond the startup phase, the market has witnessed a recent surge in activity from growth debt funds. These vehicles are specifically structured to provide capital that accelerates expansion, extends the cash runway and supports companies in bridging the gap to break-even operations.

For mid-cap and large-cap transactions, the market relies heavily on traditional bank financing rather than capital markets. These acquisitions are ordinarily funded through club deals or syndicated loans provided by a mix of foreign and domestic lenders. Conversely, the high-yield bond market remains a relatively weak and infrequently used source of leverage for private equity transactions in Poland. Across these structures, lenders typically secure their exposure through comprehensive collateral packages, including pledges over shares, bank accounts and assets, as well as mortgages and security assignments of receivables. Structuring also routinely involves the subordination of intra-group loans and necessitates compliance with transfer pricing regulations regarding guarantee fees in cross-collateralised scenarios.

Financial assistance restrictions in Poland vary significantly based on the target’s legal form. For joint-stock companies, corporate law generally prohibits the target from providing financing or security to facilitate the acquisition of its own shares. While a specific “whitewash” mechanism exists – requiring transactions to be on market terms and backed by a specific capital reserve – it is often viewed as operationally complex. In contrast, limited liability companies are not subject to a strict prohibition on financial assistance; however, they remain bound by capital maintenance rules that prevent distributions or the use of assets to shareholders if this depletes the funds necessary to cover the share capital.

To mitigate these limitations and satisfy lender requirements for upstream security, practitioners typically implement a debt push-down structure involving a special purpose vehicle (SPV). In this scenario, the SPV incurs the acquisition debt to purchase the target. Post-closing, the SPV merges with the target company. This downstream merger consolidates the acquisition liabilities with the target’s operating assets into a single entity. Consequently, the surviving entity can secure the debt against its own asset base, effectively bypassing the pre-merger restrictions on financial assistance and aligning the debt obligation with the cash-generating operating company.

Standard form loan documentation derived from Loan Market Association (LMA) templates prevails in the Polish market, including on Polish law governed deals and in Polish language versions. The financing documentation process typically commences with a heads of terms or term sheet (short-form or long-form in LMA standard), which varies significantly in detail, followed by conditional commitment letters and ultimately full finance documents. The level of negotiation is substantial and material, characterised as a complex exercise in balancing the lender’s risk mitigation requirements – driven by capital protection and regulatory obligations – with the borrower’s need for operational flexibility. Negotiations are particularly intense because acquisition finance documents operate on the restrictive principle that “what is not permitted is forbidden” necessitating elaborate negotiations over the definitions of permitted actions regarding asset disposals, debt incurrence and security.

Negotiations primarily centre on balancing lenders’ risk mitigation with borrowers’ operational flexibility. Discussions heavily scrutinise financial covenants – specifically leverage, debt service coverage and CAPEX limits – where borrowers demand sufficient headroom to avoid technical defaults. Due to the restrictive nature of finance documents, parties rigorously negotiate “permitted actions” regarding asset disposals, additional indebtedness and intercompany loans to avoid operational paralysis. In multi-layered capital structures, intercreditor agreements require precise alignment on payment subordination and security ranking between senior and mezzanine lenders. Furthermore, acquisition-specific mechanisms are critical; parties debate the scope of “clean-up periods” allowing grace periods to rectify a target’s pre-existing breaches and “certain funds” provisions, which are essential for ensuring closing certainty despite potential minor defaults.

The Polish private debt market has firmly established itself as a flexible alternative to bank financing, increasingly characterised by hybrid structures where banks and funds collaborate rather than compete to fund complex projects in sectors such as energy transition and defence. Driven by an anticipated M&A recovery and substantial available capital, transaction sizes are scaling significantly, despite the higher cost of capital compared to traditional lending.