M&A transactions, public or private, have several components and go through a variety of phases. These typically include agreeing the deal in outline, structuring, due diligence, documentation, signing, satisfying conditions precedent, closing and post-closing integration. There are frequently linked transactions too, such as equity fundraisings, co-investment arrangements and bank financings. Naturally, there is also a merger control by the antitrust authority if certain thresholds are fulfilled.

By and large, M&A transactions in Poland go the same route. Poland is fully integrated with the EU so most of the European rules apply in Poland. However, not everything is at it seems and the buyer should be careful when buying a Polish business. Poland offers many advantages to international companies and investors. Poland, despite the pandemic, enjoys stable economic growth and a high level of legal certainty. It is a first -rate production facility for the entire Europe.

 
Here are the major points to be aware of:
 
1. Due diligence
Due diligence is a crucial stage of any M&A transaction, including Poland. It is essentially a legal review of documents and information on the target company or assets. The primary goal of the due diligence is to find legal risks. Then, to analyze, assess, and describe those risks. Finally, to recommend mitigating measures.
 
Not everything is as it seems and that is especially true when buying a business. Polish businesses have developed over a long period and usually changed hands many times. Lawyers need to do due diligence to make sure the information presented to the buyer is valid and shows an accurate picture of the condition of the business. Clients want to make sure they know what items the business actually owns, what is leased, what is owed to the business and what the business owes to others. Clients do not want to buy a business only to find out there is a huge pile of bills that are due and the income they were expecting does not materialize. Doing a solid job of due diligence in Poland will help clients avoid buying the wrong business or paying too much for the business.
         
2. Proper review of the financial statements
The owner can produce financial statements that show a business is thriving. This needs to be checked. Lawyers need to properly review financial statements of the target company to make sure the information presented to them is valid and shows an accurate picture of the condition of the business. Lawyers cannot do it all just by themselves - they should be assisted by someone who understands exactly how to read financial statements. A good and trusted accountant well trained in the local rules will be able to ask for supporting documentation which will tell them whether the business is generating what the seller alleges it is.

It is also recommended to go behind the actual figures and check the general ledger and its entries, especially to check and verify the source documents such as agreements, invoices or receipts. A general ledger is a book that bookkeepers use to record all relevant accounts. The general ledger tracks five prominent accounting items: assets, liabilities, owner’s capital, revenues, and expenses. Typically, transactions are posted in general ledger accounts. Later, account balances are calculated and transferred from the general ledger to a trial balance before appearing on a company's official financial statements.
 
3. Structure of the transaction
To sign the good deal clients need to have a good deal structure. Going for the simplest solution (i.e. money in exchange for the share certificates from the seller) is probably the worst structure. Lawyers have to structure the transaction in the way that the risk of overpaying is as low as possible so that the clients can retain the money until the process is over. There are many ways to achieve it.
 
As in the case of reviewing the financial statements, clients cannot do it all just by themselves - they should go out and seek advice from a commercial lawyer. Clients need a commercial lawyer to assist them in reviewing and drafting the purchase agreement. In a typical purchase agreement, there will be terms where if the sellers make false representations, the buyer will have recourse in terms of going back and making a claim against the seller and trying to get out of the transaction. Doing a solid job of due diligence will help clients to agree better terms with the seller and take into accounts most of the identified risks.
 
There are many other aspects of a successful transaction in Poland but these three points are a key to the positive outcome. Poland offers many advantages to international companies and investors. Poland, despite the pandemic, enjoys stable economic growth and a high level of legal certainty. It is a first -rate production facility for the entire Europe. Poland’s economy is built on production structures in a wide range of industrial sectors, which have developed over a long period. An ideal location at the centre of Europe makes Poland highly attractive as an investment and production facility for supplying the markets of both Western and Eastern Europe.

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