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AUSTRIA: An Introduction to Corporate/M&A

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AUSTRIA: An Introduction to Corporate/M&A

Austria is a stable and modern market economy with a GDP per capita that is among the highest in the world according to the OECD. Austria has a good position in the ranking of the World Economic Forum’s Global Competitiveness Report. The improved ranking is driven by the availability and use of the latest technologies, Austria’s efficient labour market and strength in innovation. Other key advantages of Austria as a business hub are its infrastructure, its highly skilled labour force, its high social security and the quality of its education system.

The Austrian Federal Government adopts a relaxed attitude of non-interference towards foreign investment, creating and maintaining favourable conditions for both Austrian and foreign investors. In principle, there are no restrictions on foreigners doing business in Austria or investing in businesses in Austria. Exceptions are the Real Estate Transfer Acts (“Grundverkehrsgesetze”) that restrict the acquisition of real estate by persons living abroad. Further, under the Federal Act on Foreign Trade (“Außenwirtschaftsgesetz 2011”) investors from third countries require an approval for acquisitions of companies operating in areas of internal and external security (defence equipment industry, security services) or general public services, including social security (particularly hospitals, rescue services, fire brigades, energy or water supply, telecommunication services, traffic or education). There is no general rule that permissions are required for doing business in Austria. However, many sectors are regulated and subject to the Trade Regulation Act (“Gewerbeordnung”). The financial services sector (e.g. banks, insurers, etc) is subject to the standard EU regulations.

Austria has a transparent, effective and reliable legal system. There have been and there are political efforts to resolve obstacles to starting and running a business in Austria (e.g. simplifying the foundation of limited liability companies). The Austrian government currently pursues a programme to enhance Austria’s competitiveness as a business location (e.g. modernising the stock corporation law to increase legal certainty).

The strength of the Austrian economy lies mainly in its international outreach and its strong collaboration with the economies of other countries. Furthermore, Austria has been adapting its legal system to international standards, in line with the standards of the EU, in order to further enhance its international competitiveness. Moreover, Austria has a rapidly growing technical start-up scene that attracts a qualified labour force and foreign investments. 

Austria’s government is currently planning a comprehensive tax reform in order to reduce the tax rate, in particular in relation to the corporate tax. The proposal addresses an overall tax structure reform, tax relief for companies and the simplification and modernisation of the system.

Compared to the previous year, M&A activity in 2018 saw only a slight decrease in the number of transactions, but almost a cut in half of transaction value (data according to EY M&A-Index Austria 2018, published in January 2019). A total of 324 deals with a value of EUR 7.9 billion took place in Austria in 2018, compared to 345 deals with a total volume of EUR 14.7 billion in 2017. Whereas 2017 saw four major transactions with a value exceeding EUR 1 billion each, 2018 only saw half of that number (ADNOC (target) – OMV AG (buyer) and ZKW Holding GmbH (target) – LG (buyer)). With 72 transactions and a value of EUR 2.4 billion in 2018, the real estate sector contributes the biggest share to the 2018 total in value (in particular CA Immo (target) – Starwood (buyer)/IMMOFINANZ (seller), S IMMO AG (target) – IMMOFINANZ (buyer)). The industrial sector as a runner-up in value (EUR 1.9 billion) records the highest number of transactions in 2018 (81 deals) and therefore returns to a high M&A activity. As in previous years, Germany remains the most important M&A market (inbound and outbound) for Austria.