The ability to get a transaction up and running quickly – that’s the value we offer,” say Jakub Plewka and Andrzej Davis, principals at ACS, an accounting & corporate services boutique that has been working on M&A transactions for more than a dozen years. We talk about their assessment of the current market situation, whether Polish governance is scaring off investors, and why a limited liability company is still a no-brainer when it comes to special purposes vehicles.
How do you assess 2021 in terms of investor activity on the Polish market?
Jakub Plewka: It was a good year. We can see it very clearly from the number and quality of projects that our clients have opened and implemented. It was also a year of the return of many business ventures frozen due to the pandemic. Many of them were finalized in the third and fourth quarter of last year. Besides, high activity on the M&A market is presented in many reports summarizing the year 2021. According to some of them, it was even a record year.
Andrew Davis: But it was not only a good year in that respect, but it was also a very interesting year, bearing in mind which investors and which projects they were pursuing. Invariably, of course, we had a lot of investments with German capital, a lot of investments were made in the real estate sector, but we also cooperated with large IT companies, RES investors, or companies that chose Poland after Brexit.
Small and big business is now living with the turmoil of the Polish order. Do these tax changes, which you also deal with, not scare off investors?
Jakub Plewka: Investors who enter Poland or are preparing to do so do not pay much attention to it. They see it as a part of the risks and challenges related to entering a new market. They leave it to us. Those who are already operating in our country are not likely to suspend their projects or develop new stages due to these changes. Nevertheless, a certain climate of uncertainty is perceptible.
Andrzej Davis: So far we do not have any examples that would indicate that the changes have made Poland a less attractive market. However, it is always the regulatory instability or big changes in the law that cause this climate of uncertainty. Recently I have been more concerned, especially among American investors, about rising inflation and potential protests of particular professional groups.
Do you think 2022 will also be a good year in terms of investor activity?
Jakub Plewka: Everything seems to indicate that. Of course, January is always a slightly less ‘active’ month, but there is nothing to indicate that the economic situation will be bad in the following months. The interest of investors and lawyers in ready-made companies – this is our market barometer. So far, so good. Interest in projects, as well as in our “investment vehicles” is high.
Andrew Davis: We, dealing with accounting and corporate consulting, have already gone through two bubbles – the Internet and real estate. Then we first massively opened companies, and then liquidated them. Now there are no similar signals, which should herald a deterioration in the market situation.
Referring to your many years of experience on the market and with company transactions, what do you consider to be the biggest obstacles or problems in such projects?
Andrew Davis: The problem is always the lack of regulatory stability. At one time there was a lot of confusion with VAT. I participated in transactions involving the sale of organized parts of companies. When one of them closed, VAT was not deducted, in the second it was, and in the next it was not. Such changes in the law cause great confusion, sometimes mistakes and financial losses. All advisers must be particularly careful in such transactions.
Jakub Plewka: Large transactions are usually well secured, also thanks to numerous advisors. However, sometimes it is the case that, figuratively speaking, everyone is looking above all else and there are stumbling blocks on small minor regulations or procedures. Sometimes the investors themselves do not pay enough attention to knowing certain local procedures and there is confusion over electronic signatures, various registers or powers of attorney. Suddenly these procedures stop the whole process and some signatures take a few weeks or even months to process. The second issue is AML and KYC regulations. I have the impression that banks in Poland have recently been conducting a more restrictive policy. This is also noticed by investors from other countries and they are often amazed by what banks require from them in this respect.
As a company providing accounting and corporate services, you also offer the already mentioned ready-made companies. Why is such a product still attractive if today we can set up a limited liability company online in one day?
Andrew Davis: With large projects and demanding investors in mind, the situation is not so simple. The devil is in the details which make a big difference and it is not always possible to register everything so quickly.
Jakub Plewka: And this is the value of ready-made companies. The possibility of launching transactions quickly – this is the value we offer. By purchasing a company from us, an investor has a guarantee that it is well-prepared and ready for the project that will be implemented through it. In addition, as a specialized company we provide all the documents necessary to conduct a quick due diligence of such a company, after which everything is clear. From a practical point of view we are more efficient in dealing with certain issues, we have already practiced procedures with the Tax Office and other offices we work with on a daily basis. The same applies to relations with banks. As I said before, we are selling not the company itself but the assistance in launching the project, an investment vehicle which can quickly start up and efficiently adapt to a specific investment.
Andrew Davis: As part of such adaptation of the company, we apply for, for example, tax interpretations, even before the company is sold, so that the investor has a real guarantee that his project, which is to be implemented with the help of this company, will come true.
Mostly limited liability companies are chosen as special purpose vehicles, but for a few months now in Poland there is also a simple joint-stock company, which was created for investment purposes, especially for start-ups. Do you also use this structure?
Jakub Plewka: No, our customers are not interested in this form. PSA has its advantages, but a limited liability company is definitely better. It is simple and guarantees investors a secure and stable structure.
Andrew Davis: And that’s the key thing, a limited liability company doesn’t have any legal complexities, it’s transparent. This is what investors care about. They want to focus on their business and opt for solutions which do not interfere with this. The structure of a limited liability company has proved itself in this respect many times.
As you yourselves admitted, stability of regulations – this is the most important for investments, but we have more and more regulations in various areas. What is currently the biggest challenge in this area – tax regulations or AML and compliance in the broad sense?
Jakub Plewka: Definitely the latter. I see a lot of risk related to AML and compliance regulations. Banks are becoming increasingly restrictive in this area and it is a challenge to keep up with these regulations and to adapt to them. This challenge is taken up by us basically on a daily basis, because as we run special purpose investment companies, we see all the cash flows and we have to take care of it.
Jakub Plewka, Director Corporate Services – he has been with ACS since 2018, previously as Manager of the legal and corporate department of TMF Poland he was responsible for corporate, ready-made company and board services provided to international clients with operations in Poland. He has experience in acting as a board member of numerous companies also belonging to international structures listed in the Fortune 500.
Andrzej Davis, Managing Director – for many years served as Managing Director of TMF Group’s Polish operations, providing accounting and financial services to international clients doing business in Poland. Previously, he worked as CFO for an international food company and as Vice President of the Swiss publishing house Edipresse in Poland.
The article originally appeared on Legal Business Poland.
