Poland's 1990s Family Firms Face a Succession Reckoning

Many owners of Poland's family businesses are now over 60, and firms founded in the 1990s and early 2000s are confronting what Pinsent Masons calls "one of the most important decisions in their history: succession planning."

The cohort is large and concentrated. Polish family businesses are heavily represented across manufacturing, distribution, fast-moving consumer goods, construction and business services, according to the law firm's analysis. The founders built their companies after Poland's systemic transformation from a communist regime to a free-market democracy at the end of the 1980s, part of the broader wave of democratic change across Central Europe.

The timing has also created a sellers' market. Since joining the European Union, Poland has attracted growing volumes of foreign capital, and private equity funds and strategic buyers are increasingly targeting the mid-market, where family-owned businesses represent a significant share of deal flow. Pinsent Masons says this has created more options for family businesses than ever before.

What are the three succession models?

Pinsent Masons sets out three primary routes:

• Family succession. Most founders reach for this first. It keeps the business in the family and preserves the existing owners' values, culture and legacy. Typically, the founder steps back and one of their children becomes the new face and management of the firm.
• Management buyout. This works where the next generation is not ready, not interested, or simply not the right fit. The MBO transfers ownership to the people who already run the business day-to-day.
• External investor. This requires a full or partial exit to a private equity fund or a strategic buyer — a competitor, a larger player in the same sector, or an international group looking to enter the Polish market.

When should firms start planning?

Now, and not when a trigger event forces the issue. Pinsent Masons says succession planning is often most effective when the process takes place 3-5 years before any intended transition. That window gives the business, its employees and its clients time to adjust to new ownership before it is formally executed.

The firm also advises businesses to evaluate which model fits best and to seek both legal and financial advice on the implications of each before committing to a path.

What homework should owners do first?

Pinsent Masons recommends a series of concrete steps:

• Commission a legal and tax health-check of the business structure. This can surface issues that complicate any succession route, including ownership fragmentation, undocumented IP or informal governance arrangements.
• Open the conversation with the next generation or the management team, with appropriate legal support and documentation.
• Prepare early for due diligence if a private equity or strategic exit is on the table. Financial reporting, contracts, employment arrangements and regulatory compliance paperwork all need to be in order.

The stakes of informality are concrete. Informal asset or income transfers may be challenged by tax authorities, resulting in unexpected tax liabilities. Undocumented arrangements may surface during due diligence, potentially reducing the business's valuation or even blocking a transaction.

The upside works the same way. A well-prepared business is likely to be perceived more favourably by potential investors, which can have a positive impact on the company's valuation, according to Pinsent Masons.

How is the M&A market responding?

Polish family businesses established between 1990 and 2005 are now reaching the natural point at which founders must decide what happens next. Many have no formal succession plan in place — a gap Pinsent Masons says underscores that succession is not only an issue for the future but a problem owners must face today.

The deal evidence backs that up. In recent years, a significant proportion of M&A transactions in Poland have involved family businesses or business founders, confirming that founder-led businesses remain an integral part of the country's M&A activity and broader economy.

Founders are also becoming increasingly open to external solutions when faced with succession challenges, Pinsent Masons notes, including cases where owners seek liquidity while retaining some element of family involvement. As the firm puts it, the question now is no longer whether to act — it is which succession model fits the business and its future operations and outlook.