AUSTRIA: An Introduction
M&A Market in 2024
The Austrian M&A market showed signs of stabilising at a low level, but once again fell short of expectations. In 2024, 245 transactions were announced, corresponding to an increase of 7.9% on 2023’s 227 announced deals. However, transaction volume was down 24.2%, from EUR6.6 billion in 2023 to EUR5.0 billion. Surprisingly, no mega-transactions (ie, with a deal value exceeding EUR1 billion) were recorded in 2024, defying the global trend and contrary to 2023, when Austria saw two such transactions (the sale of Cargo-Partner to Nippon Express for EUR1.4 billion and the acquisition of a majority stake in Constantia Flexibles by One Rock Capital Partners for EUR1.1 billion).
In 2024, the highest-volume transactions were the acquisition of Austrian telecommunication towers from Cellnex for EUR803 million by a consortium of Vauban Infrastructure Partners, EDF Invest, and MEAG MUNICH ERGO Asset Management, followed by the acquisition of Knab Bank by BAWAG for EUR510 million. In contrast to developments in Austria, the global M&A market recorded an 11% increase in transaction volumes in 2024 compared to 2023, with a total transaction volume of USD3.3 trillion (EY M&A-Index Österreich 2024).
In line with the previous year, the industrial and telecommunications, media and technology sectors dominated in terms of the volume and number of transactions. The telecommunications sector recorded the highest transaction volume, at EUR1.5 billion, closely followed by the industrial sector, with transaction volume of EUR1.3 billion. In terms of the number of transactions, the industrial sector ranked first with 83 transactions, followed by the technology sector with 70 deals (EY M&A-Index Österreich 2024).
The reasons for the sobering recovery in the Austrian M&A market remain unchanged from previous years – ie, economic uncertainty, higher interest rates, and multiple previous and current crises, in particular the ongoing war in Ukraine. In addition, politically important elections were pending (in Austria, the EU, and the US), the outcome and consequences of which – particularly the landmark US presidential election – were unclear for a while.
Key Legal Developments
Flexible corporation
The Flexible Corporation (FlexCo) is a new form of corporation established in 2024, and is often referred to as a hybrid between a private limited liability company (GmbH) and a joint-stock corporation. The FlexCo is essentially based on the GmbH framework but provides for certain options usually only available to stock corporations. The FlexCo concept was pushed by the start-up sector, making this its main area of application. In 2024, 784 FlexCos were created in Austria, while 13,500 GmbHs were founded in the same period. Although the FlexCo has established itself as a company form, it is unclear whether a breakthrough will materialise. FlexCos are still exotic animals in M&A deals, mainly due to legal uncertainties and foreign investors’ lack of familiarity with them.
Corporate Sustainability Due Diligence Directive
The introduction of the Corporate Sustainability Due Diligence Directive (CSDDD) has been under discussion for a long time but – once implemented – will be a further regulatory measure to be considered in the context of M&A transactions. The “Omnibus Package” published by the EU Commission on 26 February 2025 softens the draft CSDDD to the effect that compliance with human rights and environmental standards throughout the entire supply chain no longer has to be ensured, but only with respect to direct suppliers. It remains to be seen whether the CSDDD is already in a close-to final form, as the first deadline for implementation has been postponed by one year to 26 June 2028, with the law taking full effect one year later. The CSDDD will affect M&A transactions in the future: a buyer will be interested in CSDDD compliance in the due-diligence process (depending on the industry and relevant locations) and the implementation of findings in the transaction as closing conditions, warranties, and indemnities. A seller, on the other hand, will have to provide proper documentation of its compliance with CSDDD requirements.
Foreign Subsidies Regulation
The Foreign Subsidies Regulation (FSR) came into force in 2023, providing for a new regulation to combat distortions of competition caused by foreign (ie, third country) subsidies in the EU internal market, with notification and approval requirements for the acquisition of significant EU companies. A notification obligation applies if the target company or any merging company has a total annual turnover of EUR500 million or more in the EU, and one of the companies involved in the transaction has received a third-country contribution of EUR50 million or more within the last three calendar years.
The relevant notification must be made prior to the closing of the transaction, and the acquisition may only be completed once the review has been completed, with the EU Commission being able to impose fines in the event of non-compliance with FSR requirements. Therefore, from now on, the “trio” must be observed for M&A transactions (ie, merger control (MC), foreign direct investment (FDI) and FSR). As of September 2024, there were already around 100 relevant notifications submitted to the European Commission, which is more than generally expected. It can be assumed that the enforcement of the FSR will increase in 2025.
Outlook for the M&A Market in 2025
More recently, and despite enduring uncertainty, interest rates, inflation, and other economic indicators have slowly begun to move into a more M&A-friendly direction in Austria and other markets relevant to the Austrian economy. At the beginning of the year, the European Central Bank (ECB) lowered its base rate to 3.15%. By way of comparison, in 2024, the base rate was 4.5%, 3.9%, and 3.65%, ending the year at 3.4%. In addition, other factors that contribute to an increase in Austrian M&A activity include a reduction in the inflation rate from 3% (value for 2024) to 2.5% (forecast of Austrian Institute of Economic Research (WIFO)) or even to 2.1% (forecast of European Commission), as well as a growth in GDP of 0.6% (WIFO forecast) following a recession over the two previous years (down 1.0% in 2023 and down 0.9% in 2024).
On the other hand, company insolvencies in Austria have risen steadily in recent years, with 6,587 registered in 2024, representing an increase of 22% versus 2023 (5,380 registered). In 2025, this number is expected to increase to as many as 7,000 corporate insolvencies, which would be a further 6.2% increase compared to 2024. Of interest is the disproportionate 95% increase in major insolvencies (insolvency proceedings with liabilities of over EUR10 million) from 44 in 2023 to 86 in 2024 (KSV1870, Insolvenzstatistik 2023/2024). It remains to be seen whether such figures will lead to an increase in distressed M&A deals. In particular, the Signa insolvencies could contribute to an increase in insolvency and restructuring-driven transactions, such as distressed M&A transactions.
However, high financing costs due to persistently high interest rates compared to pre-COVID-19 levels (in 2019 the base rate of the ECB was 0.25%), geopolitical uncertainties, and stricter regulatory requirements will continue to weigh on the Austrian M&A market.