Despite various challenges, the Polish M&A market is improving and offers great opportunities for investors willing to engage in innovative and complex deals, with a promising outlook for growth and development in the coming years.

Capital Market Dynamics

The Warsaw Stock Exchange (the “WSE”) has seen a revival in IPOs, whetting appetites for private transactions while creating opportunities for financial investors.

Debt Financing

The availability and pricing of debt financing continues to impact the M&A market. High interest rates and limited availability of low interest debt have led to increased deal complexity. However, innovative deal structures are being used to make deals happen despite these challenges.

Regulatory Challenges

Increased scrutiny in the regulatory context, particularly in light of the foreign direct investment regime and the new EU Foreign Subsidies Regulation, complicates the acquisition process. However, Poland’s regulatory regime remains relatively friendly to foreign investors.

Technology and Digitisation

Poland’s technology sector is booming, with a strong focus on innovation and digitisation reshaping the M&A landscape. This is attracting IT talent and making companies in the software and gaming sectors attractive targets for potential acquisitions.

Valuation Discrepancies

The M&A market faces challenges due to differing valuations between buyers and sellers, leading to complex deal structures and extended negotiations. However, innovative deal structures like earn-outs, deferred payments and vendor loans are being used to bridge these gaps.

The IT/technology, banks and financial institutions, infrastructure, renewable energy, e-commerce, healthcare, FMCG and retail sectors have all experienced significant M&A activity in the past 12 months.

M&A transactions regarding private companies are usually effected by the acquisition of shares from the selling shareholders, the acquisition of a business as a going concern or the issuance of shares to a new shareholder sometimes with the shares of the existing shareholders being bought back and redeemed (although this situation occurs substantially less often and usually involves distressed businesses).

There are many structures available that could lead to a takeover of a listed company in Poland, driven by the shareholders’ pattern, the legal requirements of the prospective buyer and/or sellers and the domicile of the listed entity (ie, corporate law driven by the registered seat or place of incorporation). At least one tender offer would generally be required to complete a takeover regardless of the approach taken.

A tender offer is an invitation to submit offers to sell shares and it is made publicly by the bidder to all the target company’s shareholders. The invitation sets out the terms of the proposed acquisition including the number of shares it wishes to acquire (subject to statutory rules as to the minimum thresholds) and the price. When a shareholder “accepts” the invitation it is actually offering to sell its shares. A tender offer is therefore not “offering” in strictly legal terms.

If the tender offer is successful, ie, when it becomes unconditional, the shares in the target company belonging to shareholders who have placed their subscriptions are delivered to the bidder in return for payment.

Although the term “tender offer” is commonly used when describing this structure in the English language, it is not strictly accurate from a legal point of view. This is also why shareholders are often referred to as “tendering” or “subscribing” to the “tender offer”, as opposed to simply “accepting” it.

In both private and public M&A transactions it is also possible to merge two companies by a share exchange, but these structures are only implemented occasionally and M&A transactions are usually effected through acquisitions rather than mergers (mergers often occur as part of a post-completion integration of businesses). Therefore in this guide the focus is on acquisitions and comments on mergers are limited.

Takeovers are supervised by the Polish Financial Supervision Authority (the “PFSA/KNF”).

The acquisition of shares in a Polish public company is governed by the Act on Public Offerings, Conditions Governing the Introduction of Financial Instruments to Organised Trading and Public Companies of 29 July 2005. This Act came into force on 24 October 2005 and has been supplemented by secondary legislation.

The conduct, form, structure and timetable of takeover transactions is exclusively regulated by primary and secondary legislation and not by any voluntary code or set of rules established by a stock exchange. As a result, the Polish regulator has no power to issue any waivers to many of the Polish provisions of law. The regulator’s power to assist with interpreting Polish law is limited and these interpretations are not binding, even on the regulator itself.

In its capacity as regulator, the PFSA/KNF also has jurisdiction over M&A transactions concerning banks, insurance companies, brokerage houses and some other types of regulated financial institutions.

The Polish Competition Authority (the “PCA”) is the competent authority for the clearance of foreign direct investments and merger clearance, unless the matter falls under the mandatory jurisdiction of the European Commission.

Transactions regarding entities that hold agricultural land may require clearance from the National Agricultural Support Centre (Krajowy Ośrodek Wsparcia Rolnictwa or KOWR).

Clearance from the Minister of the Interior may be required for a non-European Economic Area (EEA) buyer for the acquisition of real estate or shares in a company that holds real estate.

Clearance from the Minister for State Assets or other competent authority may be required for the acquisition of shares in an entity that is covered by an investment protection regime (see 2.6 National Security Review).

Finally, if a transaction concerns an entity that operates in a regulated sector, the relevant regulator may have some jurisdiction over M&A transactions in respect of the regulated entity (eg, the National Broadcasting Council (Krajowa Rada Radiofonii i Telewizji or KRRiT) has jurisdiction over radio and TV broadcasters).

Foreign investment in Poland does not generally require special approval from the authorities. As an EU member state, Poland applies the principle of free movement of capital and the principle of non-discrimination. Therefore, investors from EU, EEA or European Free Trade Association (EFTA) member states may invest according to the same principles as Polish citizens and are not treated as foreigners.

However, in order to enjoy the same rights as Polish citizens, foreign investors need to meet certain criteria, eg, obtain a residence permit in Poland. Otherwise (save for where international treaties provide differently), an investor may only participate in a limited liability company, joint stock company, limited partnership or partnership limited by shares.

Moreover, there are limitations on foreign equity participation with regard to some sectors of the economy, such as aviation and radio and television broadcasting.

Certain limitations apply regardless of the investor’s origin, with regard to certain regulated activities where a concession, licence or registration in the register of regulated activities may be required.  If so, the relevant regulatory bodies may be authorised to revoke licences for state security reasons. In the case of some sector-specific regulations, the regulators have the express right to revoke a licence upon a change of control.

The foreign direct investment regime introduced in response to the COVID-19 pandemic is set to expire on 24 July 2025. It applies to foreign investors (dominant entities) as follows:

• in the case of natural persons: persons who are not citizens of an EU/EEA/OECD country; or
• in the case of other entities: entities that do not have their registered office in an EU/EEA/OECD country and/or entities that have not had their registered office in an EU/EEA/OECD country for at least two years.

This regime also applies to indirect acquisitions by foreign investors. The list extending the application of the rules is broad and includes the following:

• acquisitions made through subsidiaries;
• acquisitions made at the request of a foreign investor (including acquisitions by investment portfolio managers made for their clients); and
• acquisitions made by entities acting in concert with a foreign investor.

A foreign direct investment transaction is one that results in a foreign investor:

• acquiring a stake equal to or greater than 20% or 40% of the total number of votes in a Polish company or, in the case of a Polish partnership, making a contribution to a Polish partnership equal to or greater than 20% or 40% of the total contributions in the partnership;
• acquiring a stake in the profits of a Polish company equal to or greater than 20% or 40%; or
• otherwise acquiring a significant participation in, or a dominant position over, a Polish company, eg, via the acquisition or lease of an organised part of the enterprise from a Polish company, entering into a control (management) agreement and/or a profit transfer agreement in relation to a Polish company or the acquisition of a majority of votes in a Polish company.

If the foreign direct investment transaction concerns a company that operates in any of the sectors that are deemed “strategic” or conducts “strategic” activities, it is subject to the new foreign direct investment regime and requires prior clearance from the PCA.

The regime affects:

• companies that conduct economic activity across a wide range of sectors, including energy, science, technology, telecommunications, medicine and food produce;
• companies active in the development or modification of software across sectors including energy, water, science, technology and commerce and food supply and all software, regardless of the sector, that is used for data gathering and processing;
• companies that own “critical infrastructure” (as defined in a separate law); and
• all Polish public companies listed on the WSE, regardless of the sector in which they operate.

A de minimis exemption applies for Polish target companies with Polish revenue below EUR10 million in either of the two financial years preceding the notification. Furthermore, the Polish government is entitled to introduce additional exemptions.

The acquisition of real property (including the so-called perpetual usufruct right in real property) by foreigners requires a permit from the Minister of the Interior and Administration. This restriction also applies to the acquisition of shares by a foreigner where this results in the takeover of control over a company owning real property and to the purchase of shares in a company owning real property that is a controlled entity.

Any foreign direct investment transaction made in breach of the foreign direct investment regime will be null and void, and the investor will not be able to exercise its rights attached to the acquired shares (including any voting rights).

Moreover, non-compliance with the foreign direct investment regime constitutes a criminal offence subject to a penalty of imprisonment of between six months and five years and a fine of up to PLN50 million. A penalty of imprisonment of between six months and five years and a fine of up to PLN5 million may also be imposed on managers of target companies who fail to notify the PCA of the shareholders’ non-compliance with the foreign direct investment regime, and on those who attempt to exercise voting rights in breach of the foreign direct investment regime.

The following transactions are subject to mandatory merger control by the PCA:

• mergers;
• acquisitions of direct or indirect control (be it sole or joint) over one or more undertakings and/or assets; and
• the creation of a joint venture (including non-full-function joint ventures).

The PCA must be notified of a transaction if the following occur in the financial year preceding the concentration:

• the combined global turnover of the parties exceeds EUR1 billion; and/or
• the combined turnover of the parties exceeds EUR50 million in Poland.

Turnover includes the turnover of each party’s capital group and part of the turnover of their jointly controlled entities (but the seller’s turnover is excluded).

The notification obligation is triggered if either of these thresholds is met. The thresholds only have to be met by one party.

Exemptions

A transaction does not have to be notified if any of the following exemptions apply:

• in the case of the acquisition of control and/or assets, if the target company’s turnover in Poland did not exceed EUR10 million in either of the two financial years preceding the concentration;
• in the case of mergers or the creation of a joint venture, if the turnover of any party to the merger or joint venture did not exceed EUR10 million in Poland in either of the two financial years preceding the concentration; and
• in the case of inter-related transactions (simultaneous or subsequent acquisitions from one and the same capital group of assets and/or control over an undertaking or undertakings that occur within a two-year period), if the combined turnovers of all of the acquired target companies and targeted assets generated in Poland did not exceed EUR10 million in either of the two financial years preceding the most recent concentration.

In addition, there is a soft law exemption from the notification obligation in the case of extraterritorial joint ventures with no Polish operations and no vertical links with companies operating in Poland.

The following transactions fall outside the merger control system:

• intra-group transactions;
• acquisitions of shares, on a temporary basis, by a financial institution or by an undertaking for the purpose of securing liabilities; and
• acquisitions of control or assets in bankruptcy proceedings (if the target company does not compete with the buyer’s capital group).

The PCA may impose a fine on an undertaking taking part in a concentration (in the case of the acquisition of control and/or assets only on the buyer) of up to 10% of its turnover for a breach of the standstill obligation or failure to notify the transaction. The PCA may also impose a fine of up to 50 times the average wage in Poland on individuals from the management who have failed to give notification of an intended concentration.

Depending on whether a transaction is an asset deal or a share deal, different legal provisions should be taken into account.

Generally, in the event of an asset deal the transaction may trigger a transfer of the employment undertaking to the new employer, which occurs automatically once the relevant criteria are met.

For a share deal, the focus should be on compliance with the employment regulations by the target company.

A share deal or asset deal transaction does not give employees the power to block it. In certain situations, however, information and/or consultation obligations may arise.

Acquisitions of certain Polish companies in various strategic sectors such as energy, chemicals and telecommunications, regardless of the investor’s country of origin, require notification to the competent governmental authority, which may block the acquisition by objecting to the proposed transaction.

The list of companies protected by this regime has been relatively stable for many years. However, it has recently been significantly extended to include, among others, key private TV stations and telecommunications companies. While following the most recent additions the list is still fairly short and comprises 24 companies, potential investors in companies in strategic sectors need to bear in mind that the government is free to add any entity in these sectors to the list at any point in time.

In the case of a failure to comply with these obligations, any unlawful material acquisition is null and void. Secondly, it is punishable with a fine of up to PLN100 million (approximately EUR22 million) and/or imprisonment of between six months and five years.

In addition, in some regulated industries the regulators may revoke licences for state security reasons and in some instances upon a change of control or other material change in the shareholding the relevant regulator needs to be notified, so the regulator may effectively intervene if it finds the new owner unacceptable.

The number of cases relating to M&A transactions in Poland is relatively low and during the past three years there do not seem to have been any significant M&A cases or legal developments that have materially impacted M&A.

There have been no significant changes to takeover law in the past 12 months. The latest far-reaching change took place in May 2022.

A prospective bidder will generally be free to stakebuild. This means they will generally be free to acquire shares directly or indirectly through a special purpose vehicle prior to the announcement of the tender offer. However, if as a result of the stakebuilding, a 50% threshold is exceeded, the bidder will be required to announce an unconditional, mandatory tender offer.

When deciding to stakebuild prior to the announcement of a tender offer, it should also be taken into account that the acquisition of a controlling stake (in practice even a stake of approximately 30% might prove to be controlling in a public company) usually requires obtaining prior anti-monopoly clearance and/or other regulatory clearances (eg, foreign direct investment).

Additionally, it should be considered than the price paid for shares acquired both directly and indirectly within 12 months prior to the announcement of the tender offer must be taken into account when setting the minimum tender offer price.

Apart from this, insider dealing and market manipulation legislation may have an impact on the feasibility of these kinds of share purchases.

Material shareholdings in public companies and changes to those shareholdings must be publicly disclosed and notified to the PFSA/KNF and the company involved.

The notification requirement applies to any shareholder who:

• directly or indirectly reaches or exceeds the thresholds of 5%, 10%, 15%, 20%, 25%, 33%, 33.3%, 50%, 75% or 90% of the total votes in a public company; or
• held at least 5%, 10%, 15%, 20%, 25%, 33%, 33.3%, 50%, 75% or 90% of the total votes exercisable in a public company and, as a result of a reduction of its equity interest holds 5%, 10%, 15%, 20%, 25%, 33%, 33.3%, 50%, 75% or 90% or less of the total votes, respectively.

The notification has to be made within four business days of the date of the change or the date on which the shareholder became aware of the change or, acting diligently, should have become aware of the change or, in the case of transactions executed on the regulated market or in the alternative trading system, within six trading days of the date of the transaction.

These notification requirements also apply to a shareholder in the following circumstances.

• Held over 10% of the total votes and this shareholding has changed by at least:
1. 2% of the total votes, in the case of a public company whose shares have been admitted to official listing; or
2. 5% of the total votes, in the case of a public company whose shares have been admitted to trading on a regulated market or admitted to an alternative trading system.
• Held more than 33% of the total votes and this shareholding has changed by at least 1%.

Furthermore, for the purposes of the notification requirements Polish law requires that a parent entity must include the number of votes held by its subsidiaries when determining its shareholding in the target company. Therefore, in determining whether these thresholds have been reached or exceeded, every entity must take the shares held by its direct and indirect subsidiaries into account. The law also provides for other rules extending the disclosure obligations to other persons/entities, eg, persons/entities acting in concert.

The rules regarding the disclosure of significant stakes are set out in the law implementing the relevant EU Directive and may not be amended by the target company in its articles of association, by-laws or any other way.

However, there are some protective measures companies may take in order to minimise the risk of a takeover. Although these protective measures are not very popular among those identified on the Polish market, the most common include:

• the issuance of privileged shares;
• introducing individual rights (eg, to appoint members of the supervisory board or management board) or providing limits on stakes from which shareholders could vote during shareholders’ meetings, under Polish law; and
• setting out a limit (not lower than 10% of the total number of votes) above which a shareholder will not be able to cast votes in the articles of association. For example, if the limit is set at 10% and the shareholder holds 12% of votes it will only be entitled to cast 10% of the votes).

All these measures require special provisions in the articles of association of a listed company and their introduction may be needed prior to the listing of the company in question.

Dealings in derivatives are allowed in principle. Certain limitations may apply in respect of specific types of instruments.

The disclosure obligations with respect to shares apply to the acquisition or disposal of financial instruments (such as options, swaps, futures or forwards) which:

• after the maturity date has passed, unconditionally entitle or oblige their holder to acquire shares to which voting rights are attached, which have already been issued by the issuer; or
• directly or indirectly refer to the issuer’s shares and have economic consequences similar to the consequences of financial instruments (such as options, swaps, futures or forwards), regardless of whether those instruments are exercised by way of a cash settlement.

A holder of these instruments is obliged to aggregate them with the shares they hold and verify whether the reporting thresholds have been reached or exceeded and, if so, report this accordingly.

Shareholders are not required to publish the purpose of their acquisition of shares and their intention regarding control of the target company under Polish law.

The target company itself is not technically a party to a tender offer under Polish law. The making and acceptance of a tender offer is a matter between the shareholders and the bidder. In theory it would therefore be possible to launch a tender offer without any contact between the target company and the bidder. However, this would mean that the bidder would only rely on publicly available information on the target company, which includes the annual accounts and semi-annual and quarterly financial information as well as any information of a price sensitive nature.

Under Polish law there is no requirement as to the method of any approach to the target company, should a bidder decide to make one. Contact can be made directly with the target company’s management board or channelled via the financial advisers of either the bidder or the target company.

What is most important is that any discussions with the target company’s management board should be kept confidential.

Prospective bidders seldom decide to rely solely on publicly available information. Contacts between them and target companies are therefore typical. These contacts should be assessed by the target company in the context of the requirements under the Market Abuse Regulation (the “MAR”) and should be handled accordingly if identified as insider information.

In practice target companies tend to identify these contacts when the preparatory steps regarding the transaction are relatively advanced (eg, when the target company decides to commence negotiations with a prospective bidder to assess the potential future co-operation and starts the due diligence process). However, the publication of this information is often delayed due to the procedure set out in the MAR and is only released when the transaction has been agreed and just before the tender offer is launched providing there are no earlier leaks.

As with any acquisition, a prospective bidder will usually want to perform some form of due diligence of the target company. In the case of private companies, an agreement with the vendor is normally reached in this respect. However, in the case of public companies, the regulations concerning access to, and use of inside information, have to be taken into account.

In practice the scope of the due diligence depends on the commercial agreement between the potential bidder and the vendors (eg, founders of the listed target company) and access to the target company itself. Generally, it is up to the management board of the target company to decide whether or not to provide information to a prospective bidder.

The board also decides on the scope and level of detail disclosed. If the bid is friendly, in addition to information disclosed by other means, the proposed investor is often granted full access to the target company and its books, including site visits and meetings with the target company’s management.

If the transaction management is entrusted by shareholders to the target company and it initiates the so-called “review of strategic options” process (which generally means that the target company conducts a more or less organised form of auction process to select a bidder that will be best placed to launch a takeover transaction) both standstills (very often) and exclusivity (less often) appear. In this context a standstill (ie, undertaking not to buy shares or launch a hostile offer for shares or sometimes more broadly for financial instruments of the target company) is usually included in the non-disclosure agreement that all the prospective bidders are requested to sign before being admitted to the next stage of the process.

On the other hand, exclusivity (if any) is usually granted by the company or the selling shareholders to a selected bidder at the end of the process, once one preferred bidder has been selected as a result of the bidding process and/or negotiations.

Otherwise, the standstill and exclusivity undertakings:

• are less popular if there is a one-on-one transaction; and
• are not common if a bidder is considering a hostile takeover or a more general takeover without prior contact with the target company and its shareholders.

In practice, potential bidders tend to have support from/commitment of a group of the target company’s shareholders to secure the outcome of the takeover transaction. In this case it is typical to have an agreement with the shareholders (and sometimes also with the target company itself), which usually covers more elements than just the tender offer (its terms and conditions). However, this agreement is only binding among the parties thereto and has no impact on other shareholders. The terms and conditions of the takeover transaction with other shareholders will be solely set out in the tender offer document.

There are a number of factors that influence the timeframe of a takeover transaction. The most important are:

• the structure of the acquisition (ie, the sequence of steps leading to the takeover), including whether the prospective bidder is interested in buying a majority stake in the listed target company, and a requisite element of the transaction also includes a squeeze-out of the minority shareholders and delisting from the WSE; and
• the scope of the regulatory clearances/consents required to take over the given target company.

Should the bidder only consider making a tender offer the transaction could be completed within less than two months (this is the shortest possible time legally required to complete a tender offer assuming that regulatory proceedings would not impact the timing).

On the other hand, if the transaction is to include a tender offer, squeeze-out and delisting and complex regulatory process it may last several months and in extreme cases more than a year.

As of May 2022 a mandatory tender offer must be announced by anyone who exceeds 50% of the total number of votes in a company listed on a regulated market in Poland under Polish law. In practice this means the regulated market of the WSE.

This rule only applies to listed companies having their registered seat in Poland. However, there are several companies listed on the WSE which are incorporated in jurisdictions other than Poland. These companies are, therefore, subject to a matrix of laws comprising both the laws relevant to the jurisdiction where they are incorporated and the Polish law applicable to listed companies.

This interaction can become quite complex. For example, in relation to the regulations applicable to a tender offer for all the outstanding shares in a company the threshold for the mandatory tender offer would be set by the home member state of the company, while other more technical rules relating to the consideration which can be paid under the tender offer and to procedural matters will be governed by Polish law.

Polish law specifies a minimum price for tender offers. The law specifies a number of factors that the bidder must take into account when assessing the price and may not offer a price that is lower than the highest of them. Among the factors determining the minimal price are VWAPs, the highest price paid or agreed to be paid for any shares in the target company by the bidder in the 12 months before the tender offer, etc. In some cases the law also requires that the price offered cannot be lower than the fair market price set by the auditor retained by the bidder for this purpose.

In terms of consideration, Polish law allows for a cash payment (as a primary form of payment of the consideration). In addition, it is admissible to offer payment of the consideration in the form of other financial instruments (shares or other securities) listed in Poland carrying the right to vote. Nevertheless, the bidder is obliged to offer the selling shareholders the choice between securities and cash. Taking all this into account payment of consideration in a non-cash form is not popular in Poland.

A mandatory tender offer or a delisting tender offer (which is a Polish law requirement and not a requirement of the Takeover Directive) may not include any conditions, including in terms of regulatory clearances/permits.

Only a voluntary tender offer may be subject to certain conditions under Polish law. This is a closed list and therefore it is not possible to create and propose new conditions in the tender offer.

The only admissible conditions are:

• the passing of a specific resolution by the shareholders’ meeting or the supervisory board of the target company;
• the success of another tender offer for shares of a company forming part of the same capital group as the target company by a company forming part of the same capital group as the bidder;
• the conclusion by the target company of a specific agreement, eg, a co-operation agreement with the bidder;
• the satisfaction of any legal conditions required to close the tender offer, including obtaining clearance from the Polish Office of Competition and Consumer Protection or any other relevant competition authority; and/or
• the legally required approval to acquire shares of the target company being granted by the general meeting of shareholders or any other decision-making or supervisory body of the bidder.

Other conditions, in particular subjective conditions are not permitted. The bidder is also not entitled to pull out of the tender offer in the event of a material adverse change in the position of the target company or because of any information it may have received in respect of the target company which proves to be incorrect.

In addition to the conditions set out in 6.4 Common Conditions for a Takeover Offer, the bidder may establish a minimum acceptance threshold of up to 50% and will be obliged to purchase shares offered by other shareholders only if this threshold is reached or exceeded. The acceptance threshold may be changed during the term of the subscription period (but not to more than 50%) or even waived completely.

When assessing whether the minimum acceptance threshold has been reached, the bidder is required to combine any shares it (and entities from its capital group as well as entities acting in concert with the bidder) held before the tender offer and the number of shares covered by subscriptions submitted by shareholders during the tender offer. If the threshold has been reached or exceeded that bidder may not walk away from the tender offer on this basis.

In fixing any acceptance threshold it is important to understand what voting thresholds apply to shareholders’ resolutions in a Polish public company. The key thresholds (provided for by law and which can be increased in the articles of association of a company) are:

• 50% + 1 vote: operational control, ie, any resolution not subject to a higher threshold, which usually includes the power to appoint and remove members of the company’s supervisory board and to approve the dividend;
• two-thirds: the merger of a public company with another company;
• 75%: changing the company’s constitutional documents and approving a capital increase;
• 80%: disapplying the pre-emption rights of the existing shareholders upon a capital increase; and
• 90%: approving the delisting of the company (a 50% quorum is required).

With the maximum acceptance threshold not being more than 50% of the target company’s shares, any bidder has a certain degree of uncertainty as to the level of control it can achieve over the target company when launching its tender offer.

It was previously possible to set the minimum acceptance threshold at a significantly higher level (initially bidders tended to set this threshold around the squeeze-out threshold to make sure that the transaction would always eventually lead to the acquisition of 100% of the target company). This was often contested by the minority shareholders who claimed that the tender offers were artificial given that they rarely led to the crossing of the high minimum acceptance thresholds. These claims were successful and the threshold was first decreased to not more than 66% and then to 50% since May 2022.

A tender offer may only be announced after security has been created for 100% of the value of the shares subject to the tender offer. This has to be documented by a certificate issued by the bank or other financial institution that provided the security or acted as an intermediary in the providing of the security. Therefore, obtaining financing cannot be a condition of a tender offer.

Since May 2022 there has been a closed list of permitted forms of security which comprises:

• the blocking of funds on the bidder’s cash account;
• the blocking of shares for which there is a liquid market;
• the blocking of bonds issued by the State Treasury or other member state or a country belonging to the OECD, deposited in an investment account;
• a bank guarantee;
• an insurance guarantee, and
• a bank surety.

Out of the permissible forms of security, a bank guarantee and blocking of cash tend to be the most common. In any event, it must be a form of security that gives the broker certainty that if the tender offer is successful it will be able to fund and settle transactions with the shareholders who took part in the tender offer. The form and content of the security is therefore always subject to detailed discussions with the broker prior to any tender offer announcement being made.

If the bidder enters into an agreement with a shareholder in parallel (but usually prior) to the tender offer, the agreement may include a broad range of protections aimed at securing deal certainty, such as contractual penalties, break-up fees, non-solicitation/non-compete provisions, interim period undertakings, etc. Generally, in the context of takeovers of public companies one may see attempts to replicate mechanisms popular in the context of takeover transactions of private companies.

On the other hand, under Polish law a target company is not technically a party to any takeover and is just the subject of a transaction between the shareholders and the bidder. Its co-operation is therefore optional and agreements with the target company aimed at securing the deal are not common.

Payment of break-up fees by the target company and any other arrangements of a similar financial or economic effect would be difficult for the management board of the target company to justify and are not a common practice in Poland. This is because it could be argued that these agreements are not in the best interests of the company, especially when it is not able to secure the final outcome of the transaction, as this is dependent solely on the individual decisions of the shareholders. Any agreements between a prospective bidder and the target company are therefore usually very soft and are primarily to enable access to the company for due diligence purposes.

If a bidder does not seek 100% ownership of the target company, they can secure additional governance rights by entering into agreements with other shareholders (eg, shareholder agreements) or requesting additional corporate rights to be included in the articles of association of the target company. 

It must, however, be noted that in the context of listed companies in Poland the shareholder agreement must be drafted carefully in order to avoid the creation of an “acting in concert” situation, which could trigger disclosure and tender offer obligations for the parties to the agreement.

Under Polish law all entities bound by a written or oral agreement on:

• the indirect or direct acquisition of shares in a public company or the taking up of shares as a result of an offer not being a public offering of shares of a public company;
• voting in concert at the general shareholders’ meeting; or
• conducting a long-term policy in respect of the company, are treated as parties “acting in concert”.

Additional corporate rights included in the articles of association of publicly listed companies may include the individual personal right of a shareholder to appoint a member or members of the supervisory board or even a management board.

Voting by proxy is permissible in Poland but given that a takeover transaction is generally a matter between the bidder and the target company’s shareholders obtaining any shareholders’ resolution to launch and/or complete a tender offer is usually not required. Voting by proxy therefore has limited relevance for these types of transactions.

Polish law contains a procedure allowing a bidder to compulsorily acquire the shares in a listed target company held by the minority shareholders. This can be done by acquiring 100% of the shares of the target company once the bidder has acquired 95% or more of the target company’s shares (or more precisely voting rights from these shares). However, this procedure may only be applied to Polish public companies. In the case of a foreign issuer of shares this procedure, if used, would be regulated by the corporate laws in its jurisdiction of incorporation and may differ.

In order to initiate a squeeze-out, a shareholder (individually or together with other shareholders) must hold at least 95% of the voting rights in the target company. It is important to note that this procedure may only be initiated within three months following the threshold being crossed.

The squeeze-out procedure is a relatively quick and automatic process that sees the bidder acquire all of the outstanding shares from the minority shareholders without their consent. The squeeze-out process typically lasts less than a month and comprises two stages:

• the non-public stage, initiated by way of providing a squeeze-out document to the PFSA/KNF for its review (this lasts 14 business days); and
• the execution phase during which the squeeze-out document is published and the process is concluded.

Unlike in a tender offer, the period during which a squeeze-out offer must remain open is not prescribed by law. It is generally up to the entity announcing the squeeze-out procedure to decide how long it will be open instead. This is because in this case the procedure is automatic and no action on the part of the minority shareholders is required.

All the necessary actions are performed by the National Depository for Securities and the brokers holding shares for the minority shareholders. The length of the squeeze-out period is therefore only driven by the technical needs of these entities. A squeeze-out procedure is usually not open for more than four or five business days, as this period should be sufficient for the National Depository for Securities and the brokers holding shares for the minority shareholders to communicate and take the necessary actions to carry out the squeeze-out.

Squeeze-outs are subject to minimum pricing rules similar to those applicable to tender offers.

An alternative to stakebuilding is for a bidder to obtain irrevocable undertakings or letters of intent to accept its tender offer once it is made from certain key shareholders. These are not regulated in Poland and are rather popular in organised processes initiated by the shareholders or when there are major shareholders, such as the founders of the company.

There are examples where certain major shareholders (eg, aligned with the management) have given undertakings to accept a specific tender offer and not any competing offer. These undertakings are not prohibited.

However, some Polish institutional investors are reluctant to give any firm commitment to accept a tender offer. It is therefore difficult to obtain this type of protection from financial investors and market practice in this respect is not very well developed.

A tender offer has to be announced and carried out through an entity authorised to conduct brokerage activity in Poland. This intermediation is mandatory and there are steps that only an appointed broker can take for the bidder.

A tender offer may only be initiated after security has been created for no less than 100% of the value of the shares subject to the tender offer. This has to be documented by a certificate issued by the bank or other financial institution that granted the security or acted as an intermediary in the granting of the security. It must be hard security and the admissible forms thereof are specified under Polish law.

As in the case of a squeeze-out there are two phases in the tender offer process: limited public disclosure and fully open to the public.

The first phase is started when the broker acting on behalf of the bidder notifies the PFSA/KNF of its intention to announce a tender offer, attaching a draft of the full tender offer document and proof of the establishment of security to the notification, which will be made 17 business days prior to the planned launch of the tender offer.

After submitting the notification, the broker should immediately submit the information regarding the intention to announce the tender offer including, among other things, the name of the target company, the identity of the bidder and the proposed price to the press agencies, for the purpose of publication. This is the only information provided to the general public at this stage (the full tender offer document is therefore not disclosed yet).

The second stage starts after the lapse of 17 business days after the notification to the PFSA/KNF, when the broker communicates the contents of the tender offer document to at least one press agency for the purpose of its announcement. The press agency disseminates the tender offer information to the public and from this moment the tender offer is announced and the full tender offer document is available to the public.

Once properly announced, a tender offer cannot be abandoned unless another entity announces a tender offer for all the outstanding shares of the same target company, provided that the price offered for them is higher than in the first tender offer and there are no conditions in the subsequent tender offer (ie, it is either a mandatory tender offer, a delisting tender offer or a voluntary tender offer without a single condition stipulated therein).

For the reasons indicated when describing the forms of the admissible consideration in the case of a tender offer, tender offers are not combined with the issuance of new shares. Moreover, the tender offer regulations per se do not provide for such a possibility. The mechanism is connected with the merger of entities instead and generally requires a suitable information document or a prospectus if no exemption could be applied.

In the takeover process carried out through a tender offer the bidder is not required to produce or publish any special financial information on the target company or combined businesses (such as pro forma financial statements).

Unlike in the case of certain other jurisdictions, the tender offer document is not very complicated. It usually comprises a few pages of general information about the target company, the bidder, the proposed price, a specification of the applicable statutory minimum prices, the terms and conditions of the tender offer (in the case of a voluntary tender offer) and other useful information regarding the proposed takeover.

Furthermore, the tender offer document should also include other information deemed material for the target company’s shareholders, such as the bidder’s potential plans with regard to the target company prior to the completion of the tender offer (eg, supporting the target company in attempts to seek debt financing) and details of any incentive schemes, if any, proposed for the target company’s management.

Unlike certain other jurisdictions, the scope of disclosure in Poland is rather limited. The bidder is generally obliged to publish the tender offer document, the content of which is strictly regulated by Polish law. Furthermore, it may be that the target company and/or the bidder (if it is also listed) will be required to issue a suitable MAR report on the transaction.

However, like in other countries where the MAR applies directly these reports provide a summary of the most important information (eg, an agreement). It is possible that some valuation reports and/or fairness opinions may be prepared in the context of the tender offer (eg, before issuing its opinion on the announced tender offer, the target company’s management board may request a fairness opinion from a third-party expert). If valuation reports or fairness opinions are obtained, they must be published in full.

Apart from these valuation reports/fairness opinions, neither the target company nor the bidder is required to disclose any of the transaction documents in full, in the context of takeovers in Poland.

Most M&A transactions in Poland are structured as share acquisitions and, subject to certain exceptions, directors have a limited role (if any at all) and no specific duties.

If a tender offer is announced the management board of the target company is obliged to communicate its position on it to the PFSA/KNF and the public. This must be done no later than 14 days following the announcement of the tender offer.

The management board’s position must also be disclosed at the same time to the representatives of any employee associations (eg, trade unions) active in the company and, if there are none, directly to all its employees.

The management board’s opinion must include its views on the effect of the tender offer on the company’s interests, including its workforce, the bidder’s strategic plans in relation to the company and their likely effect on the company’s workforce and the place of the company’s business, as well as its view on whether the price proposed in the tender offer reflects the company’s fair value, with the proviso that the fair value may not be determined solely on the basis of the price at which the company’s shares have traded up until that time.

Market practice shows that receiving a recommendation of the target company’s management board greatly increases the likelihood of a tender offer succeeding in the absence of a higher competing bid. If, however, a takeover is “hostile”, the position of the management board may discourage shareholders from taking part in the tender offer and the outcome of the tender offer is sometimes unknown until the final moment of the bid.

Management boards of target companies may obtain an external fairness opinion in order to provide the reasoning behind the board’s view on the tender offer (but are not required to do so). However, this is not common practice in Poland and it is generally more frequent in the case of hostile or competing bids, or where the members of the management board may have some interest in the transaction. If the management board seeks a fairness opinion it must also disclose it to the public (full disclosure of the received opinion is required).

In transactions structured as an acquisition of the business as a going concern members of the management board will be responsible for agreeing the commercial terms in the interest of the relevant company.

Similarly, in the case of mergers and demergers the members of the management board of the participating entities will be responsible for agreeing the merger/demerger plan (ie, agreement setting the framework for the merger/demerger) and for the subsequent implementation steps (subject to the shareholders’ approval). Some further obligations may apply depending on the structure of the merger/demerger and if the company is listed.

There is no established market practice for management or supervisory boards to establish special or ad hoc committees in the context of an announced tender offer. This may happen in the case of foreign companies listed in Poland rather than in the case of Polish companies.

Given the limited role of management in takeover situations in Poland there is usually no deference at all to the judgement of the board of directors in takeover situations.

Directors (especially members of the management board) often seek advice as to their overall role in the transaction and providing confidential and commercially sensitive information to investors.

There have been no cases of conflicts of interest of directors, managers, shareholders or advisers being the subject of judicial or other scrutiny in Poland in the context of major M&A transactions. However, liability cannot be ruled out.

Tender offers to purchase shares in a company listed on the WSE can either be recommended by the management board of the target company or be hostile. However, Polish law does not distinguish between the procedures for recommended and hostile tender offers.

A bidder who does not anticipate co-operation from the target company’s management board can only rely on publicly available information on the target company. Because prospective bidders seldom decide to rely solely on publicly available information, purely hostile takeovers are not common in Poland.

Directors are free to apply defensive measures in principle.

However, the articles of association of a listed company may provide that during the tender offer procedure the management board and the supervisory board require the consent of the shareholders’ meeting to take actions aimed at making the tender offer unsuccessful (except for actions aimed at another investor launching a competitive tender offer).

The articles of association may also provide that under certain circumstances restrictions on voting rights and preferential rights for multiple vote shares do not apply during a takeover bid. If these restrictions are introduced, the articles of association must outline the terms for equitable compensation for the shareholders whose rights are restricted during the takeover process, with compensation paid within 30 days of the relevant general meeting.

A variety of measures may be available. The most common are:

• various shark repellents (usually some special rights granted to certain shareholders);
• various poison pills;
• buyback of shares; or
• seeking a white knight alternative buyer.

Directors remain bound by their general duty to act in the interest of the company.

Whether or not directors can “just say no” and take action that prevents a business combination depends on the transaction structure. In a tender offer directors may express their opinion and apply some defensive measures but have limited means to block the acquisition.

Litigation in connection with M&A deals is not very common in Poland. While there are usually a lot of pre-trial or otherwise contentious issues among parties to M&A transactions, most of them are settled or otherwise resolved without a formal court dispute or arbitration having to be resorted to.

While post-completion disputes over warranties or indemnities happen from time to time, a vast majority of M&A-related disputes seem to arise when shareholders cannot agree on the exit strategy or various types of earn-outs and deferred consideration or post-closing price adjustments (if any). Pre-trial or contentious issues regarding M&A transactions are therefore pretty commonly raised in relation to put or call options as well as drag-along and tag-along rights or similar arrangements. Disputes often arise over discrepancies in positions on the application of the contractual price determination mechanism.

Disputes relating to transactions that failed to sign or close are rather uncommon.

For various reasons (eg, limited to the enforcement of specific performance claims (ie, forcing the defaulting party to close the deal)) “broken-deal” disputes are usually not a very practical solution and are hardly ever pursued in practice.

Therefore, greater focus should be placed on the appropriate contractual provisions encouraging the parties to perform the agreement (eg, sanctions or security) or regarding the receipt of compensation for the damage incurred rather than on relying on specific performance claims (which are usually technically available but difficult to pursue in practice).

Shareholder activism in listed companies is generally relatively high in Poland. There are law firms that specialise in representing activists or play an activist role themselves. It is not uncommon for activists to acquire a small stake (even a single share) and actively exercise their shareholding rights in order to attempt to invalidate corporate resolutions approving transactions or otherwise attempt to jeopardise the company’s management board’s and/or the majority shareholders’ agendas.

Activists do not really encourage companies to enter into M&A transactions, spin-offs or major divestitures. They usually focus on achieving their own goals or blocking some plans of companies rather than seeking to encourage companies to actively move in a certain direction.

Given that a typical M&A transaction in Poland does not involve a shareholders’ resolution for completion of the acquisition (ie, minority shareholders do not usually have an opportunity to vote against and file a claim), the practical ability of activists to block the completion of the transaction is rather limited.

However, it is not unusual for activists to attempt to interfere with resolutions on the increase of the share capital (if shares are to be issued to a new shareholder) or with post-completion steps such as a squeeze-out or delisting.