Private Equity 2025 Comparisons

Private equity (PE) continues to represent only a modest portion of Austria’s transactional landscape. The Austrian corporate environment is traditionally characterised by a high density of small and medium-sized enterprises (SMEs), many of which are family-owned and place a strong emphasis on long-term independence. These businesses have historically taken a cautious stance towards financial sponsors and continue to favour conventional bank financing over equity-based investment models (ie, a PE sponsor acquiring a minority or majority stake). However, this preference is expected to shift gradually, driven by evolving market dynamics and increased financial sponsor activity. In Austrian auction processes, PE sponsors play a prominent and increasing role, often acting through their platform companies.

As a result, Austria has remained relatively insulated from the more aggressive PE-driven transaction dynamics seen in other European markets. This trend persisted in H1 2025: strategic investors were involved in 109 of the 118 recorded transactions. In contrast, transactions involving PE or venture capital (VC) made up only around 8% of the total transaction volume, with just nine transactions. In comparison, H1 2024 saw 113 transactions involving strategic investors and 11 transactions involving financial sponsors such as PE or VC investors. This corresponds to a decline of approximately 3.5% in strategic activity and 18.2% in investor-backed transactions in H1 2025. These statistics disregard PE sponsors acting through their platform companies. The figures also reflect a more restrained investment climate across both investor categories, shaped by macroeconomic uncertainty, tighter financing conditions and continued valuation discipline.

The number of strategic M&A transactions is expected to reach the 2024 level of approximately 220 transactions, assuming a steady pace throughout the year. However, given the limited number of investor-backed transactions recorded in H1 2025, it remains uncertain whether the Austrian PE market will meet the 2024 benchmark of 25 financial investor transactions by year-end.

In H1 2025, the Austrian PE market focused increasingly on innovation-led and sustainability-oriented businesses, driven by growing investor interest in environmental, social and governance (ESG) aligned assets and Austria’s emerging role as a regional hub for green technology and digital transformation. In particular, the defence sector is experiencing strong growth, along with closely related areas such as artificial intelligence and advanced technology. Similarly, the healthcare and life sciences sectors continue to expand significantly, driven by innovation and increasing cross-border activity. Strategic M&A transactions were primarily concentrated in the industrial and life sciences sectors.

A notable development is the rising number of distressed M&A transactions. Austria has seen a steady increase in corporate insolvencies, including in H1 2025, with high-profile cases such as the Signa Group contributing to a sharp uptick in restructuring-driven transactions. Given the ongoing economic pressures, and with no immediate easing of insolvency trends in sight, distressed M&A is expected to remain a highly active and relevant transaction category in the near term.

The PE market in Austria is demonstrating growing appetite for investments in innovative technology-driven businesses and sustainability-focused companies. This trend reflects both increasing investor demand for ESG-aligned assets and the country’s strong positioning as a regional hub for green technologies and digital innovation.

Transaction timelines have lengthened due to increased regulatory scrutiny, especially foreign direct investment (FDI) reviews. Geopolitical uncertainty – particularly the ongoing war in Ukraine, EU-level security concerns and the complex tariff environment – has led to increased due diligence in cross-border transactions and greater caution in sensitive sectors (eg, defence-related tech, critical infrastructure, companies relying on complex supply chains, or high-tariff sales markets).

The newly introduced corporate form of the Flexible Corporation (FlexCo) is relatively popular with the start-up sector, making it the main area of application. By mid-2025, approximately 1,200 FlexCos had already been established across Austria – an indication of the market’s interest in this hybrid entity, which blends elements of a limited liability company (GmbH) with characteristics traditionally associated with a stock company (AG). Although the FlexCo has established itself as a company form, it is unclear whether it will gain significance beyond the start-up sector. Ongoing legal uncertainties, the absence of case law on critical questions, limited transactional experience and PE funds' general lack of familiarity with this type of corporate vehicle have thus far prevented the FlexCo from emerging as a viable alternative to the more established GmbH structure.

As part of the EU’s effort to “strengthen competitiveness”, the application of two major sustainability directives has been postponed. The Corporate Sustainability Due Diligence Directive (CSDDD), which obliges companies to identify and mitigate adverse impacts on human rights and the environment, has been delayed by one year, with EU member states now required to transpose the rules into national law by 26 July 2027. Meanwhile, the Corporate Sustainability Reporting Directive (CSRD), which mandates extensive ESG disclosures, has been postponed by two years. Large companies (with over 250 employees) must now begin reporting in 2028, while listed SMEs will follow in 2029. These delays give companies additional time to prepare, but the emerging need for ESG compliance remains a growing due diligence and transactional focus.

PE transactions in Austria are shaped by a regulatory framework involving several key authorities in charge of clearing transactions from the merger control (MC) and FDI screening perspectives, as follows.

• The Federal Ministry of Labour and Economy (Bundesministerium für Wirtschaft, Energie und Tourismus – BMWET) oversees FDI control, requiring mandatory approval for investments in sensitive sectors (eg, health, energy, critical technology), even for minority stakes.
• The Federal Competition Authority (Bundeswettbewerbsbehörde – BWB) is responsible for MC and must be notified when certain turnover thresholds are met.

The Austrian FDI regime applies to many transactions, even small ones, given its very broad scope and low de minimis thresholds. As the violation of FDI rules is subject to criminal liability and can result in the nullity of the underlying transaction, it is typically recommendable to seek FDI clearance.

PE-backed buyers in Austria are generally subject to the same regulatory requirements as other acquirers, particularly under FDI screening and MC rules. Regulatory scrutiny increases when investors involve complex fund structures, state-backed limited partners (eg, sovereign wealth funds) or co-investments with entities from non-EU countries. Authorities typically apply a “look-through” approach to assess actual control and influence. Even indirect state involvement may trigger a heightened review or lead to clearance with conditions, or to a denial in sensitive sectors. Early disclosure of ownership and governance structures is critical to avoid delays or regulatory risks.

The Foreign Subsidies Regulation (FSR) has been relevant for PE transactions in Austria since mid-2023. It requires mandatory filings for large transactions for the regulator to assess whether the buyer benefits from foreign financial contributions that may qualify as subsidies under the FSR (eg, from sovereign funds or state-backed investors). The preparation of such filings is time-consuming and may delay clearance beyond customary long-stop date timeframes. In a competitive auction, a bidder that is likely to fall under significant FSR scrutiny may face competitive disadvantages compared to other bidders that are unlikely to have benefitted from foreign subsidies.

In the past 12 months, Austria has also seen increased regulatory focus on anti-bribery, sanctions compliance (especially regarding Russia) and ESG requirements under the CSRD and the Sustainable Finance Disclosure Regulation. As a result, PE transactions now require more robust due diligence on corruption risks, supply chains and sustainability compliance across portfolios.

The level of legal due diligence typically depends on the size and complexity of the transaction, as well as the structure (auction v bilateral sale). In PE transactions, a risk-based (red flag) legal due diligence is standard, focusing on identifying material risks that could affect valuation, transaction structure or post-closing integration. In addition, as most M&A transactions now provide for warranty and indemnity (W&I) insurance protection, the legal due diligence must be robust so that the W&I insurance provider is able to underwrite transaction risk based on warranties where the underlying facts and circumstances have been duly investigated in the course of the due diligence process. The better the due diligence process, the more likely it is that the W&I insurance provider will fully underwrite the W&I insurance coverage.

Due diligence is usually conducted by Austrian counsel in close co-operation with the PE investor and often in close alignment with other due diligence workstreams (tax, commercial, technical, compliance, etc). Due diligence information is commonly made available via virtual data rooms, with Q&A processes co-ordinated by the seller or its advisers.

Vendor due diligence is a common feature in Austrian PE transactions, especially in structured auction processes or larger transactions. Sell-side legal advisers typically provide red-flag reports or legal fact books covering key legal areas. Such reports help streamline the process and provide early risk visibility for bidders or buyers.

Reliance on vendor due diligence reports is not typically granted to a bidder or buyer.

Most PE acquisitions are structured as private share sale and purchase transactions. These are typically share deals governed by Austrian law. Share deals are generally preferred over asset deals due to their tax and legal simplicity. For example, in an asset deal a third-party contract partner of the target business has the statutory right to oppose the transfer of the contract to the buyer (a practical issue that can be overcome by certain transaction structures but is difficult to implement and monitor by the transaction parties). However, depending on the deal structure, asset deals may be preferable in certain situations as they allow buyers to select specific assets and exclude unwanted liabilities, and typically do not require a notarial deed as a formal requirement, unlike share sale and purchase agreements governed by Austrian law.

Court-approved schemes, statutory mergers and public tender offers are not common in the context of Austrian PE transactions; these structures are more relevant in public M&A and/or intra-group reorganisations. In contrast, auction sales are most common, particularly for attractive or competitive targets. In auction settings, transaction terms tend to be more seller friendly. Sellers often provide initial draft acquisition agreements, and buyers typically are not in a position to negotiate key provisions such as warranties, indemnity coverage and conditionality. Closing certainty is a significant priority so that material adverse change (MAC) clauses are hardly ever accepted, and closing conditions are generally restricted to mandatory regulatory approvals (with stringent requirements for buyers to accept conditions imposed by such regulators).

Tax and real estate transfer considerations play a central role in structuring PE-backed acquisitions in Austria. Transactions are typically executed through one or more Austrian special purpose vehicles (BidCos) in the legal form of a GmbH, often held by one or more intermediate holding companies in foreign jurisdictions such as Luxembourg or the Netherlands.

Financing of PE Transactions

PE transactions in Austria are typically financed through a combination of equity and third-party debt, with structures aligned with international market standards. The equity portion is usually provided via a special purpose vehicle (BidCo) backed by the PE fund and co-investors. To provide contractual certainty, especially in competitive processes, PE funds may be requested to issue an equity commitment letter for the benefit of a BidCo, ensuring that the necessary funds will be made available at signing/closing.

On the debt side, committed financing at signing/closing is increasingly expected. This may include term sheets, mandate letters or fully negotiated “certain funds” debt facilities, particularly in mid- to large-cap transactions. In transactions where committed financing is not yet available at signing/closing, sellers typically require a financing comfort package, including documentation and representations around the availability of funds (eg, debt commitment letters).

Over the past 12 months, tighter credit conditions have led to a greater reliance on equity financing, increased involvement of alternative lenders, and more rigorous scrutiny of financing certainty. Overall, Austrian PE transaction financing remains robust but has adjusted to reflect current market reality.

PE Consortia and Co-Investments

Consortium transactions involving multiple PE sponsors or a combination of strategic investors and PE sponsors usually occur in larger and/or complex transactions. Co-investments alongside the lead PE fund or GP are more common and typically involve either existing LPs participating as passive investors, or external co-investors such as family offices or institutional investors. Consortia that include a PE fund and a corporate strategic investor are less frequent but are seen in sectors where deep operational expertise is a key factor. Overall, single-lead sponsor transactions remain the norm in Austria’s mid-cap market.

Consideration Structures in Austrian PE Transactions

PE transactions typically follow international market standards, with locked-box and completion accounts being the predominant consideration mechanisms. Among these, the locked-box structure is typically preferred in transactions, where PE funds act as sellers.

Completion accounts are also prominent, particularly in transactions involving more complex or volatile targets, where the purchaser is a strategic investor or when the transaction involves a business carve-out.

Earn-outs and deferred consideration are increasingly common, particularly when the target is a high-growth company or a start-up, or where there is a need to overcome a valuation gap. Earn-out structures tend to be tailored solutions but are typically linked to future EBITDA thresholds, an annual net profit or other specific performance targets. On the other hand, PE sellers are reluctant to agree to earn-outs.

Roll-over structures are a common feature in Austrian PE transactions, particularly in management buyouts or growth investments. These involve management or founders reinvesting part of their sale proceeds or otherwise retaining equity in the buyer’s structure, thereby aligning growth incentives and overcoming valuation gaps.

The involvement of a PE fund, whether on the buy-side or sell-side, strongly influences the choice of consideration mechanism. PE purchasers favour price certainty and efficient transaction execution, and frequently rely on W&I insurance to cover warranty risks. On the sell-side, PE funds typically push for minimal residual liability, favouring simple and final mechanisms like locked-box pricing and avoiding earn-outs or complex post-closing adjustments.

Locked-Box Interest and Leakage Adjustments in Austria

It is common for PE transactions using a locked-box purchase price mechanism to include interest on the equity price. This interest compensates the seller for the period between the locked-box date and signing/closing. Alternatively, the interest may be factored implicitly into the agreed purchase price if the closing is expected shortly after signing.

It is not uncommon to agree that, in the event of a leakage (ie, unauthorised value transfers by the seller or its affiliates during the locked-box period), the seller must not only reimburse the leakage amount in full but also pay reverse interest on it. These interest mechanisms are standard in Austrian PE transactions using a locked-box structure and are intended to preserve the economic effect of the fixed purchase price. However, the specific rates and application remain subject to negotiation in each transaction.

The use of dispute resolution mechanisms in PE transactions depends largely on the type of consideration structure. In locked-box structures, disputes are relatively rare due to the fixed nature of the purchase price. While specific provisions may address potential disputes over “leakage”, these are typically resolved through contractual negotiation, a valuation expert or accounting firm, or via courts or arbitration.

By contrast, completion account structures almost always include a dedicated expert determination procedure. The purchaser or the seller prepares the closing accounts, and the buyer or seller has the right to object to such accounts (or parts of such accounts) within a pre-defined period. If no agreement is reached, the matter is referred to an independent expert (often a reputable audit firm), whose decision is usually final and binding, except in cases of manifest error or fraud. This is standard market practice in Austria.

For earn-out provisions, expert or hybrid mechanisms are also commonly used, especially when performance metrics require an objective assessment. In general, a neutral expert determination is preferred for accounting-related disputes, while arbitration is frequently chosen for broader legal disputes.

Overall, Austrian PE share acquisition agreements are tailored to include efficient and transaction-specific dispute resolution tools, with expert determination being the norm for variable purchase price components.

Conditionality in Austrian PE Transactions

In Austrian PE transactions, the level of conditionality is generally limited, particularly where the seller is a PE fund aiming for a clean exit and minimal signing/closing risk. Regulatory approvals (especially MC and FDI clearance) are typically the only accepted conditions precedent, as they are mandatory and suspensory in nature.

Financing conditions (so-called “financing-out” clauses) are unusual in Austria and strongly resisted by sellers. Buyers, especially PE funds, are expected to have committed funds in place at signing. “Certain funds” undertakings constitute standard market practice.

Shareholder approval conditions are rare and only relevant in exceptional cases (eg, if the buyer or seller is a listed company or subject to special internal governance constraints).

MAC clauses as conditions to closing are almost never seen in Austrian PE transactions. If used, they are narrowly defined and heavily negotiated. PE sellers generally resist such clauses.

Regulatory Undertakings in Austrian PE Transactions

PE buyers are generally reluctant to accept full “hell or high water” undertakings in transactions subject to regulatory conditions. Such commitments – which require the buyer to comply with all competition authority remedies unconditionally – are often heavily negotiated, limited or excluded altogether. Instead, buyers typically agree to extensive co-operation and information obligations without an outright obligation of having to accept any and all imposed conditions. In some cases, parties to a transaction have agreed to a “corridor” of conditions that have to be accepted by the buyer, typically measured by way of the adverse financial impact that would fall on the buyer group if it were to accept the conditions imposed.

“Hell or high water” obligations are historically more relevant in MC, where conditions such as divestments are commonly required. Increasingly, the FDI authority imposes conditions in approval decisions, although the substance of such conditions has thus far not reached a dimension that would make compliance by buyers overly costly.

Break fees in favour of the seller are often seen in PE transactions. Break fees typically range between 1% and 3% of the purchase price and are triggered by events such as the buyer’s failure to obtain required approvals (despite a best effort obligation) or a failure to close without due cause. Austrian law permits break fees, but they are typically subject to mandatory mitigation by courts (such mitigation option cannot be waived by the parties to the share purchase agreement).

Reverse break fees – where the purchaser agrees to pay the seller a fixed amount if the transaction fails due to the buyer’s fault – are also not uncommon in Austrian PE transactions.

PE sellers and buyers can typically terminate an acquisition agreement under narrow, contractually defined circumstances. The most common grounds for termination include the failure by a party to satisfy a condition precedent (such as regulatory approval) prior to the agreed long-stop date, or the failure by a party to complete the transaction prior to the long-stop date.

The typical long-stop date in Austrian PE transactions ranges from six to 18 months after signing, depending on the complexity of required regulatory clearances.

Risk Allocation in Austrian M&A Transactions: PE v Corporate Parties

The typical allocation of risk differs noticeably depending on whether the seller or buyer is PE-backed or a corporate entity. These differences are particularly evident in the scope of warranties, liability limitations, transaction structures and the use of W&I insurance.

PE sellers generally aim for a “clean exit” and therefore seek to limit their post-closing liability to the greatest extent possible. To address buyer concerns, W&I insurance is more often used, allowing the seller to limit or exclude its liability under the sale and purchase agreement. Escrow arrangements or holdbacks are usually avoided, with purchase price payments structured to be made in full at closing.

By contrast, corporate sellers are often more willing to accept broader warranty coverage and higher liability caps, particularly in cases where reputational considerations or long-term business relationships are relevant. While W&I insurance is less prevalent among corporate sellers, it is increasingly adopted in larger or cross-border transactions.

Overall, Austrian market practice shows limited divergence in approach between PE and corporate participants. While PE-driven transactions tend to rely on standardised, insurance-backed liability frameworks, corporate-driven transactions may be more tolerant regarding a standard warranties and indemnities regime.       

For M&A transactions in Austria involving PE-backed sellers, the warranty and indemnity regime is typically structured to ensure a “clean exit” with minimal residual liability. The seller usually provides fundamental warranties (eg, title, capacity, authority) with limited operational and business warranties, which are typically fully covered by a W&I insurance policy. Tax indemnities are also commonly insured.

In PE exits, management typically does not provide separate warranties or indemnities to the buyer. Instead, all contractual protections – including warranties and indemnities – are generally given by the seller(s) alone. While management may be involved in the disclosure process or provide factual information during due diligence, it does not assume contractual liability.

In Austria, it is standard practice in PE transactions for disclosures made in the data room to exclude liability under the warranties (unless such disclosures create the foundation for indemnities of the seller, as agreed in the transaction documentation). It is common practice to define in the purchase agreement which documents and information are deemed disclosed and under what conditions such disclosure is considered valid (eg, via data room or specific disclosure schedules).

In PE transactions, general warranties are usually capped at an amount equal to 10%–25% of the purchase price, with caps commonly negotiated at the lower end of that range when the seller is a PE fund. Fundamental warranties (eg, title, ownership) may be subject to higher caps, often up to 100% of the purchase price. Specific indemnities (eg, tax) are generally uncapped and negotiated on a case-by-case basis. Claim periods typically last for 12 to 24 months post-closing, with extended periods of up to five to seven years for fundamental warranties. Certain risks (eg, tax) are often covered by separate indemnities with distinct caps and durations. It is also common to agree on a de minimis threshold per individual warranty claim (with similar claims often grouped together) and a basket. Once the basket is exceeded, the buyer is entitled to reimbursement of the entire amount of all justified warranty claims, not just the excess (first euro coverage).

Additional protections included in acquisition agreements include the following.

• W&I insurance: this is more often used in PE transactions, covering business warranties, often fundamental warranties, and also tax warranties and indemnities. It enables PE sellers to achieve a clean exit with very limited seller liability, and provides buyers with a recourse against an insurance provider.
• Escrow or retention arrangements: such agreements usually amount to 5%–10% of the purchase price with durations of between 12 and 24 months. They mainly secure business warranties and tax indemnities, while fundamental warranties may be treated separately. Where comprehensive W&I insurance is in place, escrow arrangements are not required.
• Earn-outs and deferred consideration: such regimes are increasingly used to bridge valuation gaps or align incentives.

Litigation in connection with PE transactions does occasionally occur in Austria. However, most transactions are thoroughly negotiated and typically supported by W&I insurance, which significantly reduces the post-closing dispute potential among the transaction parties. When disputes do occur, they typically relate to purchase price mechanisms (eg, earn-outs, completion accounts), alleged breaches of warranties or indemnities, undisclosed risks or post-closing covenants such as non-compete or non-solicitation clauses. Fraud-based claims or disputes concerning disclosures or omitted disclosures are equally not uncommon. Due to the widespread use of W&I, warranty-related disputes are often directed at insurers rather than sellers.

Public-to-private transactions involving PE-backed bidders are rare in Austria, primarily due to the small number of listed companies and the dominant role of one or several shareholders owning large stakes, which are structures typical for Austrian public companies. However, when such transactions do occur, they tend to involve strategic targets in regulated sectors or niche industries, and are often structured as voluntary takeover offers under the Austrian Takeover Act (ATA).

The target company’s board (Vorstand) and supervisory board (Aufsichtsrat) play an advisory and oversight role during the process, whereby the board and supervisory board must act in the best interest of all shareholders and other holders of equity securities, as well as in the interest of employees, creditors and the public.

“Relationship agreements” or “transaction agreements” between the bidder and the target are not common, due to strict rules on the equal treatment of shareholders and transparency under Austrian takeover law. Any such arrangements must be carefully structured to avoid acting-in-concert implications or breaches of mandatory disclosure requirements.

Shareholding disclosure obligations relevant to tender offers are primarily governed by the Stock Exchange Act (BörseG 2018) and the ATA. Any person acquiring shares in an issuer listed on a regulated market (Vienna Stock Exchange – Wiener Börse) must notify the issuer and the Austrian Financial Market Authority (FMA) when certain thresholds of voting rights are reached, exceeded or fallen below; the relevant thresholds are 4%, 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% and 90%. The notification must be made without undue delay and at the latest within two trading days. The issuer must then publish the notification.

In the context of a tender offer, the most critical threshold is 30% + one voting right.

• Exceeding 30% of voting rights triggers a mandatory offer obligation under the ATA, unless a specific exemption applies. This applies to both direct and indirect shareholdings.
• If an investor already holds a controlling stake conferring dominant influence without owning the majority of voting rights (ie, between 30% + one voting right and 50%) and acquires at least an additional 3% of the voting rights within a calendar year (taking into account any prior disposals), the investor must immediately notify the Takeover Commission (Übernahmekommission) and within 20 trading days launch a mandatory offer for all shares of the target company (so-called “creeping” takeover rule).
• Stakebuilding strategies by PE-backed bidders must therefore be carefully structured to avoid an unintended triggering of the mandatory offer.

A company may set forth a lower limit that already triggers the obligation for a mandatory offer.

In addition, there are specific rules for companies active in regulated sectors (banks, insurance companies, etc). For example, in the case of banks, the potential acquirer must notify and obtain permission from the FMA to acquire a certain stake in a bank (10%, 20%, 30%, 50%).

Austria has a mandatory offer threshold under the ATA. A mandatory offer must be launched if a bidder acquires, directly or indirectly, a controlling interest over a listed target, which is presumed upon exceeding 30% of the voting rights. In such cases, the “creeping” takeover rule also applies.

For PE-backed bidders, the extensive attribution rules of the ATA are particularly relevant. Voting rights held by affiliated entities – such as other PE funds under common control, portfolio companies or parties acting in concert – may be attributed to the bidder. This can trigger a mandatory offer obligation even where no single entity formally exceeds the 30% threshold. Bidders may apply for an exemption in limited cases (eg, inadvertent control due to restructuring).

In Austria, cash is the predominant form of consideration in public tender offers. While share consideration is legally permitted, it is rarely used in practice due to valuation complexities. Minimum price rules under the ATA require the offer price to be at least equal to the higher of:

• the highest consideration paid by the bidder (or parties acting in concert) for target shares within the 12 months prior to the filing with the Austrian Takeover Commission (Übernahmekommission); or
• the average stock exchange price over the six months preceding the day the bidder announced its intention of a takeover offer.

These rules ensure equal treatment and protect minority shareholders.

Offer Conditions and Transaction Security Measures in Austria

Takeover offers may include conditions, but these are strictly limited under the ATA. Conditions must be objective, clearly defined and not dependent solely on the bidder’s discretion. As a result, conditions relating to financing, due diligence or internal approvals are not permitted. The bidder must have secured financing before launching the takeover offer. Common permissible conditions include minimum acceptance thresholds (for voluntary takeover bids) and regulatory approvals.

Transaction protection measures such as non-solicitation clauses, matching rights and break fees are not prohibited but must comply with Austrian corporate law (corporate benefit rules) and must not frustrate competing offers.

Post-Offer Governance, Debt Push-Down and Squeeze-Out in Austria

If a PE bidder does not obtain 100% ownership, additional governance rights (eg, board representation, veto rights) require shareholder agreements or amendments to the articles of association, subject to Austrian corporate and capital markets laws. A debt push-down is subject to certain restrictions and typically requires the bidder to obtain at least 75% of the voting rights to implement key structural measures such as mergers or upstream loans.

The possibility to perform a squeeze-out is set forth in the Austrian Squeeze-Out Act (GesAusG). A squeeze-out is generally possible if a shareholder (together with affiliated companies, if any) holds at least 90% of a company’s share capital. The articles of a company may prohibit a squeeze-out in its entirety or set an even higher threshold. Such squeeze-out requires shareholder resolutions and provides for severe minority shareholder protections such as the possibility of minority shareholders to let a court examine the appropriateness of the cash compensation paid to them.

Irrevocable tender or voting commitments by principal shareholders are not uncommon in Austrian public M&A transactions, including PE-backed takeovers. Negotiations typically take place before the public announcement of the offer and may form part of pre-launch structuring.

Such undertakings are generally structured as hard irrevocables, meaning the shareholder commits to tender or vote in favour of the offer regardless of competing bids. However, in practice, it is not unusual to include fiduciary outs, particularly for institutional investors, allowing withdrawal if a clearly superior competing offer is made.

These undertakings are subject to disclosure requirements under the ATA and must not conflict with the principles of equal treatment and transparency included in the ATA.

Equity incentivisation of management is a common feature of PE transactions in Austria. Structures typically involve direct or indirect co-investment by management through management incentive plan vehicles. The level of equity allocated to management usually depends on transaction size, sponsor philosophy and the management’s role. These structures must comply with Austrian corporate, tax and employment law, and are often implemented through Austrian or foreign holding vehicles to optimise flexibility and enforceability. From a tax perspective, management equity may give rise to income taxation for employees at the time of grant (subject to progressive rates of up to 55%) or to capital gains taxation upon the disposal of shares (generally 27.5% for individuals), with structures frequently designed to achieve tax efficiency.

Management participation is commonly structured via sweet equity in PE transactions. The management typically invests through a dedicated vehicle, usually a GmbH, and acquires a minority share at a discount, benefitting from the upside on exit.

Sweet equity structures often include ratchets, vesting and leaver provisions, and are implemented via contractual agreements, particularly in GmbH settings where statutory flexibility is limited.

PE funds typically use preferred instruments to secure downside protection, including shareholder loans, preferred shares in stock companies (AG) or contractual liquidation preferences.

Vesting provisions are common in Austrian PE transactions involving management equity. Standard vesting schedules include time-based and/or performance-based vesting, typically over three to five years. Leaver provisions are also market standard and distinguish between good leavers (eg, death, disability, termination without cause) and bad leavers (eg, resignation, termination for cause). Bad leavers usually forfeit their unvested equity and may be required to sell vested shares at a discount or nominal value. Good leavers typically retain vested equity or sell at fair market value. Such provisions are implemented via shareholders’ agreements and must comply with Austrian employment and corporate law, particularly regarding enforceability and proportionality.

Customary restrictive covenants for management shareholders in Austria include non-compete and non-solicitation undertakings. These are typically included in both the employment agreement and the transaction agreement. Enforceability is subject to Austrian employment and competition law: post-termination non-compete clauses in employment contracts are limited to one year and must be appropriately narrow in scope and geography, and must be reasonably compensated. In the context of transaction agreements, broader non-solicitation and non-compete clauses are commonly used where the individual holds a significant shareholding and the restrictions are proportionate. Such clauses are generally enforceable, subject to overarching principles of proportionality and fairness (contra bonos mores). Non-disparagement undertakings are rarely used.

Minority protection for management shareholders is typically achieved through contractual rights in shareholders’ agreements rather than through equity ownership alone. Management may have limited veto rights over key matters (eg, changes to the holding structure, issuance of new shares, amendments to the equity plan). Strong veto rights in the day-to-day business are uncommon and depend on the relative equity stake and negotiation leverage. Anti-dilution protection (eg, full-ratchet or weighted average) may be granted, particularly where management makes a significant co-investment. However, management usually does not have control over the exit; drag-along rights favouring the PE sponsor are standard. In some cases, management may negotiate information or consultation rights in relation to exit timing or process, but not veto rights.

PE shareholders in Austria typically secure extensive control rights over their portfolio companies. This includes board appointment rights, usually allowing the PE fund to appoint managing directors and/or key members of the supervisory or advisory board (if available). A broad catalogue of reserved matters requiring shareholder or board-level consent is market standard; these typically cover changes to the business plan, major investments or divestments, financing and debt arrangements, related-party transactions, amendments to constitutional documents, issuance of new shares, executive remuneration, etc. Information rights (monthly or quarterly financials, budgets, key performance indicators) are standard and often go beyond statutory rights. These control mechanisms are implemented through shareholders’ agreements and/or articles of association, adapted to the legal form (limited liability company or stock company) of the portfolio company.

Liability of PE Funds for Portfolio Companies in Austria

Under Austrian law, shareholders or the persons behind them are not liable for the obligations or conduct of their portfolio company, provided it is a corporation (Kapitalgesellschaft), due to the principle of separate legal personality. In exceptional cases, however, piercing the corporate veil (Durchgriffshaftung) may occur, particularly if there is obvious abuse of the corporate structure, such as using the company as a mere facade to pursue unlawful or harmful purposes, deliberate asset stripping, or systematic undercapitalisation that endangers creditor interests.

In addition, Austria’s strict capital maintenance rules prohibit the unlawful return of capital contributions to shareholders in order to safeguard the company’s equity base (only dividend distributions and arm’s length transactions with shareholders are permitted). If a majority shareholder – such as a PE fund – wrongfully extracts or receives capital, it may be held personally liable for any resulting damages.

In addition to traditional private sales to other private equity-backed investors or to corporates or an exit by way of an IPO, the Austrian market has also recently seen exits via structured secondary transactions, including continuation fund transactions and management buyouts (MBOs). While still less common than in larger jurisdictions, such alternative exit routes are gaining traction, particularly in mid-market transactions.

“Dual-track” processes are regularly seen in Austria, especially in high-profile or complex exits. While relatively resource-intensive, they are used to maximise competitive tension and increase pricing pressure among bidders. “Triple-track” processes are rare in Austria. However, dividend recapitalisations and leveraged refinancings have occurred in isolated cases, particularly where market conditions were not conducive to a clean exit.

Drag-along and tag-along rights are standard features of equity arrangements in Austrian PE transactions.

Drag-along rights allow the majority shareholder (typically the PE fund) to force minority shareholders (including management or co-investors) to sell their shares in an exit, ensuring transferability. The typical drag threshold is 50% plus one share, although higher thresholds (eg, 75%) are also seen, depending on the transaction structure and investor alignment. In practice, a minimum valuation or a minimum term for the investment is typically required.

Tag-along rights entitle minority shareholders to participate proportionally in a sale initiated by the majority; these often apply from the first share sold, especially for management and smaller co-investors. Institutional co-investors may negotiate stronger protections, including enhanced tag or consent rights. Drag-along and tag-along rights are regularly used in practice and are generally enforced through the shareholders’ agreement.

PE IPO Exits and Lock-Up Arrangements in Austria

In Austrian IPOs, there is no legally prescribed lock-up period, but PE sellers are typically subject to lock-up periods of six to 12 months post-listing, aligned with international market practice. Underwriting banks generally require such lock-up arrangements to ensure market stability. Relationship agreements between the PE seller and the issuer are not legally required under Austrian law but are often implemented voluntarily to address corporate governance, information access or conflict management where the PE fund retains a significant post-IPO stake or board presence. Other particularities in PE-led IPOs include the presence of dual-track processes leading up to the IPO, structured governance transitions, and often vendor due diligence. Austrian IPOs led by PE sellers typically follow EU prospectus and market abuse regulation regimes, with close co-ordination between legal, tax and regulatory teams due to the relatively small Austrian capital market.