The end of family development empires? Experts: A wave of mergers is coming

In the coming years, the wave of mergers and acquisitions on the Polish housing market will be driven by succession problems – according to a report prepared by experts from JLL Living and CRIDO.

The report shows that two thirds of Polish family businesses are managed by the first generation and by how much 85 percent doyens plan to pass on family businesses to the next generation, no more than 15%. successors are interested in taking them over.

JLL reported that the analysis of 200 housing developers shows that only 44 have foreign or institutional owners, while as many as 156 are companies with Polish private capitaland in 52 of them signs of ongoing succession processes were noticed.

74 development companies are managed by people aged 50 or over and have not disclosed official succession plansalthough it cannot be ruled out that such actions are being taken. This group includes 48 entities owned by people aged 50 to 60 and 26 companies managed by owners over 60 years of age.

“For many of them, selling the company to a strategic investor will be not only the best, but often the only option to secure the future of the company and a favorable exit from the business. Succession will be a particular challenge, especially for residential developers operating in Wrocław, Warsaw and Kraków, where most of the companies struggling with this problem operate. Most of them are residential developers with a moderate scale of operations, with the value of projects on sale up to approximately PLN 400 million,” said Krystyna, quoted in the press release. Pietruszyńska, Director, Living Investments, JLL Polska.

According to experts, the current legal regulations favor succession processes – an example is the introduction of a family foundation, which enables the organization of ownership issues and management of family assets in a multi-generational perspective, while ensuring the possibility of taking advantage of tax preferences.

“The method of taxation may serve to multiply the assets within a family foundation. The sale of assets at the foundation level is not taxed, only the distribution of the amounts obtained from the sale to the foundation's beneficiaries is subject to fiscal liability. A family foundation therefore enables tax-effective reinvestment of funds (in the case of a decision to sell the business) and deferral of taxation until the funds are paid out from the foundation,” the press release said.

“Thanks to these features of a family foundation, owners of development companies have greater freedom in succession planning and can better protect the interests of both the family and the enterprise. However, this solution should not be perceived as a tool for quick disposal of assets. Using a family foundation solely for this purpose may be perceived as aggressive and prohibited tax optimization,” added Anna Pleskowicz, Partner, CRIDO. (PAP Business)

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