Although the volume and value of M&A involving
Austrian targets declined in 2019, Austria's M&A market
remains stable. According to Deloitte's M&A Deal Tracker
Austria, 242 transactions completed in the first three quarters
of 2019. Consumer goods proved the most active sector,
accounting for about 30% of all target companies. The services
and tech sectors came next, while for foreign buyers the tech
and real estate sectors remained highly attractive.
The number of completed M&A transactions in the market
again decreased, but only slightly compared to the previous two
years. According to Deloitte, the 242 transactions that took
place in the first three quarters of 2019 represented a 5%
decline in activity. Domestic market transactions declined
noticeably, from accounting for 28% of all deals in 2018 to 22%
in 2019. This trend shows that the market is becoming
increasingly cross-border. International transactions
– outbound as well as inbound – are growing.
The relative share of outbound deals now stands at 41%. Inbound
transactions currently account for 37% of all Austria-related
Germany remains Austria's most important M&A
jurisdiction. The German market is of interest to both Austrian
buyers and sellers. A total of 60 deals were concluded with
companies from Germany in the first three quarters of 2019
alone. This means that German companies are involved in every
third transaction on the Austrian market, although there has
also been a noticeable decline here.
Across the market, the most significant sectors for M&A
are consumer goods, telecoms, media and technology (TMT), real
estate and services. As for deal trends, most M&A
investments into Austria are undertaken by strategic buyers.
However, private equity investment is becoming increasingly
important for inbound transactions and this
trend has not changed significantly compared to previous years.
Foreign financial investors make up approximately one-third of
inbound investments. In the domestic and outbound market,
financial investors play a subordinate role, as this area is
largely occupied by strategic investors.
The most significant transaction of the first half of 2019
that had an Austrian aspect took place in the oil sector, with
OMV's investment of around €2.2 billion for the
acquisition of a 15% share in Abu Dhabi Oil Refining Company
(ADNOC Refining) and a 15% share in a to-be-established trading
joint-venture (J-V). The transaction will give OMV a stake in a
refinery hub in Abu Dhabi, with integrated petrochemicals
consisting of Ruwais East, Ruwais West and Abu Dhabi Refinery,
which has a total capacity of 922,000 barrels/day.
The next most significant transaction was the takeover of
real estate company Galeria Karstadt Kaufhof by the SIGNA Group
for around €900 million. The market also saw the takeover
of the Warsaw Spire Tower by Immofinanz for €386 million.
All in all, the top three deals in the first half of 2019
occurred in the real estate sector.
All three were outbound deals.
LEGISLATION AND POLICY CHANGES
Austrian law does not have one specific law regulating all
issues on the acquisition of companies, but rather various
different statutes apply depending on the specific type and
form of an acquisition.
For asset deals, the regulations in Sec 1409 of the General
Civil Code and Sec 38 of the Commercial Code are the most
pertinent. Sec 1409 of the General Civil Code provides that a
purchaser generally is jointly and severally liable with the
seller to the seller's creditors for any of the acquired
business' pre-transaction liabilities. The purchaser's
liability is limited to the current net asset value of the
acquired assets and applies in case the purchaser knew or
should have known at the time of the purchase of the
pre-existing liabilities. Sec 1409 of the General Civil Code is
a mandatory law and cannot be waived or amended by contract.
Liability can be reduced if the purchase price payable by the
buyer is used to pay off the debts of the sold business. Sec 38
of the Commercial Code provides that a legal entity which
acquires and continues a commercial business is liable for all
the debts the former owner incurred in the course of business
conduct, even those which are not contractually agreed to be
taken over by the buyer. Unlike liability under Sec 1409 of the
General Civil Code, liability under the Commercial Code is not
limited to the value of the acquired assets. Nevertheless,
under Article 38 of the Commercial Code the seller and buyer
can agree to limit the liability of the seller. Such a
limitation of liability, however, is only valid if a timely
notification to the commercial register is submitted or
otherwise made public.
A key regulatory authority with regard to M&A
transactions is the Federal Competition Authority
(Bundeswettbewerbsbehörde), which is responsible
for the clearance of mergers where a transaction value does not
meet the EC Merger Control Regulation thresholds but does meet
those set by Austrian competition law.
Further relevant authorities are the Commercial Register
Courts (Firmenbuchgerichte), which register and
publish transactions and reorganisations in the Austrian
commercial register, and the Financial Market Authority
(Finanzmarktaufsicht), which reviews banking
acquisitions. Public M&A transactions involving listed
joint stock corporations (Aktiengesellschaft) are also
subject to the supervision of the Austrian Takeover Commission
(Übernahmekommission), which monitors compliance
with the Austrian takeover regulations and decides on all
matters related to the Takeover Act.
Recent changes in law
Under corporate law, after closing an M&A transaction,
the management of the target company is obliged to file a
notification with the Ultimate Beneficial Owners (UBOs)
Register to update the registration with respect to the
beneficial owners who ultimately own or control a legal entity.
This is generally the case if a direct or indirect owner holds
shares or voting rights of more than 25% in a company. If no
beneficial owner can be identified, the members of the top
management level of the legal entity (for example, the managing
director and/or board of directors) are considered to be
One recent change that will affect M&A transactions was
the Amendment of the Austrian Law on the Ultimate Beneficial
Owners (UBOs) Register (UBO Register, Wirtschaftliche
Eigentümer Registergesetz). The amendment was part of
the EU Financial Adaptation Act 2019
(EU-Finanz-Anpassungsgesetz), which was published on
July 22 2019 and came into force on January 10 2020. The law
amendment increases access to the database on UBOs.
The new regulations brought in via the amendment implement
the 5th Money Laundering Directive. One of the most important
single changes is that the UBO Register will become accessible
to the general public. As of January 10 2020, any person can
request an extract from the register about any legal entity
without having to demonstrate any specific reason or legitimate
interest. Previously, only authorities and certain groups of
persons such as lawyers, notaries or credit institutes had
access. The public extract contains information on the legal
entity's name, address, register and register number and legal
form as well as information regarding the period of time for
which the legal entity has been in existence, the direct or
indirect beneficial owner's forename and surname, date of
birth, nationality and country of residence and the nature and
scope of the beneficial ownership.
Furthermore, the notification obligations for legal entities
have been made more stringent. An annual statement regarding
the completeness and correctness of the data on the UBO
Register is required regardless of whether any changes have
occurred. Apart from this annual statement, changes must be
reported on an ongoing basis within four weeks of the change
taking place. The Austrian Ministry of Finance, as the
competent register authority, is obliged to ensure the accuracy
and completeness of the registrations, which can be enforced by
penalties that have been increased.
Another change to the UBO Register concerns the voluntary
provision of a "KYC compliance package" by a professional party
representative. The UBO Register will be able to store and
exchange KYC-relevant documents about beneficial owners, and
these will only be accessible to certain persons, such as
financial institutions, tax advisors, attorneys and notaries,
to make KYC due diligence more efficient. Access to this data
can be limited to individual persons and entities.
Regulatory changes under discussion
In many countries, laws are being discussed to prevent
foreign buyers from taking over companies in sensitive
industries. Austria is one of the EU member states that already
has such a control mechanism in place: Section 25a of the
Foreign Trade Act 2011 (AußWG 2011). This mechanism
allows the government to prevent and control purchases of
shares in companies in sensitive industries by foreign
investors. In short, foreign direct investments (FDI) in
companies involved in public security and public order, as
defined by Art 52 and Art 65 (1) TFEU, are subject to approval.
This primarily impacts the defence goods industry, security
services and services of general interest (in particular energy
and water supply, telecoms, transport and certain
infrastructure for healthcare education and training).
Since May 2019 a ministerial draft has been in existence,
and under consideration by the government, to amend the Foreign
Trade Act. The draft foresees a change to Section 25a. The
minimum threshold for shareholdings acquired by foreign
investors in Austrian companies will be reduced from 25% to
10%. Anything above the 10% threshold will require approval.
Certain companies in the media industry which contribute to the
formation of public opinion via broadcasting, tele media or
print products and which are characterised by their particular
topicality and broad impact, will also be included in the group
of companies where foreign investors need approval.
Furthermore, the obligation to obtain approval would not only
apply to the foreign acquirer of the Austrian company
– as is now the case – but also to the
Austrian target company, which will have to obtain approval and
to submit the application for approval. As a new Austrian
government was only appointed in January 2020, the timeline as
to when and to what extent the amendment will come into force
Also of note is that the new government's 2020 –
2024 programme aims to further accelerate and simplify the
procedures for business start-ups, for example by promoting the
development of digitisation in corporate law.
The Austrian legal system has a few peculiarities that are
commonly misunderstood. As most M&A deals in Austria are
private M&A transactions with the target being an Austrian
limited liability company, the share deal must be made in the
form of a notarial deed in front of an Austrian notary public.
One misconception is that the notarial requirement poses a
large hurdle. This is not true, as share purchase agreements
can also be done in the English language with notaries so
qualified. With the increasing foreign involvement in Austrian
M&A transactions, it has become more and more common that
such notarial deeds are drawn up in English.
An area that does require specific attention is Austrian
stamp duty tax. Typically, stamp duty tax can become payable
based upon the simple fact that a written document is being
drawn up in Austria. Though a share purchase agreement itself
is not subject to stamp duty tax, suretyship arrangements,
whereby one company is obliged to step in and fulfil a
liability if, for example, a subsidiary does not perform, can
trigger stamp duty.
For real estate transactions, care needs to be taken in the
structuring so as not to trigger real estate transfer tax,
which can also apply to share deals.
Most factors regarding the acquisition of a controlling
stake in a public company are regulated by the Austrian
Takeover Act. A compulsory public offer must be made to the
other shareholders when a shareholder acquires a stake of 30%
or more. Hostile bids do not have different rules. In a
friendly bid however, the bidder is commonly given the
opportunity to carry out due diligence, while in a hostile bid
the bidder is generally restricted to publicly available
information. In hostile takeovers, the management board is also
obliged to remain neutral. Due to the limited number of
Austrian-listed companies, hostile bids are rather unusual in
Pursuant to Sec 5 para 2 of the Austrian Takeover Act, the
intention to acquire a stake in a public company needs to be
communicated as soon as there are rumours that could alter the
stock price. The bidder that intends to place an offer must
also inform the target's representatives immediately, notifying
them that the executive board and the supervisory board have
decided to place an offer, or that conditions have been met
that oblige them to place an offer. Public takeover offers need
to be executed in a way that minimise market manipulation and
insider trading. The members of the target company also have
corresponding secrecy and transparency duties. A further
condition is the notification of the workers council pursuant
to Sec 11 para 3 of the Austrian Takeover Act. A financial
expert must also be included in the public takeover offer
As for break fees, in public M&A transactions these are
rather uncommon, partly due to legal restrictions.
One of the biggest recent developments is that warranty and
indemnity (W&I) insurance is no longer a purely theoretical
consideration and has seen increasing use in the Austrian
market. Private equity buyers are at the forefront of this
development. Given the bridge function W&I insurance serves
between buyers needing increased contractual protection and
sellers for various reasons not willing to provide this, we
expect a further increase in its use.
Earn-outs and escrows have also become more common, but
whether a buyer can successfully negotiate these is very deal
specific. Whereas locked-box mechanisms are common in auction
settings, closing accounts often are agreed upon in one-on-one
In the case of a private takeover, typically offers prior to
the signing of definitive agreements are conditional upon a
satisfactory due diligence, the completion of transaction
documentation and the approvals of internal boards.
In terms of governing law, the parties to a private M&A
share purchase agreement (SPA) generally agree on Austrian
substantive law and dispute resolution in Austria. For the mode
of transfer, which is necessary for the transfer of shares in a
limited liability company, Austrian law is mandatorily applied.
This means that the SPA for such transfers needs to be in the
form of a notarial deed.
As for the exit environment, IPOs do not play a significant
role in the Austrian market. Generally, a shareholder
interested in selling its shareholding will either seek
potential purchasers and negotiate exclusively or will initiate
a structured bidding process to which interested parties are
invited. As the Austrian market is rather small, the
shareholder will very often be aware of potentially interested
parties in the domestic market and address them directly.
We expect the Austrian M&A market to remain robust and
for the trend towards larger transactions to continue. Although
Austria is a relatively small market, Austrian companies have a
strong reputation worldwide for having excellent expertise,
especially in the high-end tech area. As the modern M&A
market is driven by tech transformation, we believe that
Austria's expertise in this field will drive growth in Austrian
M&A transactions. Another reason for optimism is Austria's
strong economic position, which is firmly embedded in the EU.
Persistently low interest rates and high rates of liquidity in
the market will also continue to push the M&A market
Partner, Fellner Wratzfeld &
T: +43 1 53770 311
Markus Fellner is a founding partner and the head of
the firm's corporate and M&A practice. He also
specialises in banking and finance, insolvency law and
restructuring. Markus was admitted to the Austrian Bar
in 1998 and lectures at various institutions. He
obtained his law degree from the University of Vienna
and his business degree from the Vienna University of
Economics and Business.
Partner, Fellner Wratzfeld &
T: +43 1 537 315
Paul Luiki is a US native partner at fwp
specialising in the full range of M&A transactions.
He has a specific focus on cross-border transactions,
in particular in the CEE region and the US. His other
fields of specialisation include banking and finance,
contract law and arbitration. Paul is a frequent
lecturer at the University of Vienna on M&A and
Elisa Maria Kaplenig
Attorney at law, Fellner Wratzfeld &
T: +43 1 537 700
Elisa Maria Kaplenig is an attorney at law at fwp
specialising in corporate and M&A, antitrust and
competition law and corporate litigation. She has a law
degree as well as an international business
administration degree from the University of Vienna and
was admitted to the Austrian Bar in January 2020.