AUSTRIA: An Introduction to Corporate/M&A

Austria’s Economic and Business Strengths

Located in central Europe with a population of approximately nine million, Austria is a modern market economy with a strategic location and a highly skilled labour force. Austria boasts a robust economy characterised by a high GDP per capita according to the OECD, low unemployment rates and a strong industrial base. Key industries include manufacturing, services and tourism, but in recent years the country has also seen a growing number of cutting-edge technology companies and other players in R&D-heavy industries. The capital of Austria, Vienna, is a major financial centre for the CEE region and hosts in its vicinity numerous international corporations and financial institutions. Besides the Vienna metropolitan region, many hidden “champions” are based in different areas of the country, such as Styria, Upper Austria, Tyrol or Vorarlberg. Key advantages of Austria as a business hub are its infrastructure, its high social security and the quality of its education system. Due to its geographical position and proximity to expanding markets in Eastern Europe and the Balkans, Austria is an interesting location for many companies that are active in the CEE region and want to make use of Austria’s historically good relations with many countries in the wider area. The recent reduction of the corporate tax rate to 23% and tax incentives for research-intensive companies mean that Austria not only offers a stable political environment, but also attractive tax conditions for investors and companies.

The M&A Market in 2024

The M&A market in Austria in 2024 stabilised in terms of deal count compared to 2023 but was still below the annual number of deals in prior years. While the number of transactions involving Austrian companies increased from 227 in 2023 to 245 in 2024, the overall volume of transactions decreased from EUR6.6 billion in 2023 to EUR5.0 billion in 2024 (EY Österreich M&A-Index 2023; in German). According to the same study, the technology/telecom, industrial, and financial services sectors were amongst the most active branches in 2024.

The most significant publicly known transactions with Austrian targets in 2024 according to EY included the acquisition of the Austrian tower business of Cellnex by a consortium led by EDF Invest (transaction volume: EUR803 million), the acquisition of Tannpapier by Evergreen Hill (transaction volume: EUR360 million) or the acquisition of SKIDATA by Assa Abloy (transaction volume: EUR340 million). Such transactions with publicly known transaction volumes naturally capture only a small fraction of the respective market, and there were many other blockbuster deals in 2024, such as the partial exit of the founders of Single Use GmbH and Danaher (sale to Novo Holdings), the sale of the VAMED post-acute care business by Fresenius to PAI and the acquisition of French Terreal group by the listed Austrian Wienerberger group. In addition, there were significant international deals involving significant operations in Austria, such as the sale of DB Schenker by Deutsche Bahn with different active bidders in the auction process. Also, as in previous years, distressed M&A transactions remained at an elevated level, in particular in the real estate and automotive sectors.

Key Legal Developments

To highlight just a few examples, the following recent legal developments have had an impact on M&A transactions in Austria.

The Austrian FlexCo

Following longstanding requests from the Austrian start-up and venture capital community, the Austrian legislature has established with the new Austrian Flexible Company (“FlexCo”) a new corporate form in 2024. Providing, in general, greater flexibility for start-ups and scale-ups, the Austrian FlexCo Act and the corresponding changes in Austrian tax laws now also allow for the use of internationally established employee participation programmes by the issuance of company value shares (as compared to virtual interests that have been most prevalent in the past). In addition, many practitioners see the reduction of formal requirements in connection with share transfers as one of the greatest advantages of FlexCos.

Digital infrastructure assets

IT and digital infrastructure assets, mainly fibre optics, data centres and towers, have attracted significant interest in the Austrian M&A market over recent years, including from real estate and private equity investors. For example, M&A activity in the digital infrastructure sector has been growing year-on-year in Austria, with deal counts and cumulative deal values highlighting the resilience of this asset class. The sector is also influenced by the ongoing demand for data sovereignty and a multitude of European and national regulations (such as the European Energy Efficiency Directive).

FDI

In the past years, we have seen an ever-increasing number of transactions that are subject to the Austrian FDI regime. The Austrian Investment Control Act (Investitionskontrollgesetz) identifies several critical sectors in which transactions involving certain foreign investors require an FDI filing. These sectors extend beyond traditionally sensitive areas such as defence and security to include, among others, digital infrastructure, energy, IT, transport, and healthcare. Navigating the respective regulatory uncertainties and increased waiting periods has become a common feature of many cross-border transactions, even if they only involve minor Austrian subsidiaries as part of the target structure.

Digitalisation of legal processes

In the past years, Austria has been continuously focusing on the digitalisation of legal processes. Most recently, the introduction by law of the virtual shareholders’ meeting and the digital notarial deed have further decreased the formalities for national and international investors. Austria also offers extensive public funding opportunities in these areas, especially for start-ups.

W&I insurance

One of the biggest developments in the Austrian M&A market in recent years is that warranty and indemnity (W&I) insurance has become a common feature in many (also mid-cap) transactions, with private equity buyers being at the forefront of this development. The legal disputes resulting from the acquisition of Schur Flexibles by the Austrian B&C group in 2021 have put this product to a major test, which resulted in a payout of approximately EUR120 million by certain W&I insurers in 2024, while certain other disputes in respect of this transaction are still pending.

Looking Ahead

Based on the pipeline of transactions for the coming months, we expect the Austrian M&A market to be strong in 2025, albeit in many instances involving transactions that are to be considered special situations or distressed transactions. Following years of comparatively restrained appetite, we expect also to see an increased focus from private equity firms on M&A transactions with an Austrian angle, which will allow them to make use of the vast amounts of dry powder they have built up in the past years.