Contributed By CHSH Cerha Hempel Spiegelfeld Hlawati
In Austria, a private M&A acquisition is usually structured either as a purchase of shares in the target company (share deal) or of business assets (asset deal). In case of a share deal, the buyer directly acquires the shares in the target and (only) indirectly the target's business; the assets and liabilities pertaining to the business remain with the target. In an asset deal, the buyer acquires a business from a seller, which means that the assets and liabilities need to move from the seller to the buyer (subject to limitations, in particular with respect to liabilities, the parties may further define the details of the scope of the purchased assets). Whether the one or other method is applied, often depends on tax considerations, but also on the scope, shape and complexity of the business that shall be acquired, liability issues and results of due diligence, etc.
If the intention is to acquire shares in a stock corporation (Aktiengesellschaft) based in Austria, the shares of which are admitted to trading on the Vienna Stock Exchange (Wiener Börse) on a regulated market, with the aim to obtain or expand the control in such listed company, a strictly regulated procedure must be followed. This is governed by the Austrian Takeover Act (Übernahmegesetz). Since there are not many listed Austrian stock corporations, takeovers are not seen as often as in other jurisdictions.
In addition, alternative ways of acquisition are noteworthy, eg, statutory mergers, either by absorption (one company is merged into another) or by combination (two companies are merged into a newly established company). However, these techniques are typically employed within a group of companies rather than among unaffiliated entities, but may be employed as a preparatory step preceding a share deal with an unaffiliated entity to establish the envisaged target structure.
As regards merger control, the relevant authorities are the Federal Competition Authority (Bundeswettbewerbsbehörde), which is the recipient of Austrian merger control filings, the Federal Cartel Prosecutor (Bundeskartellanwalt) and the Cartel Court (Kartellgericht). Depending on the turnover thresholds, competence may pass to the European Commission, in which case the EU Merger Regulation exclusively applies without room for the Austrian merger control regime.
Dependent on Industry/Target Type
Depending on the industry of the target entity, regulators like the Financial Market Authority (Finanzmarktaufsicht) or E-Control, an authority monitoring the Austrian energy market, may supervise M&A activities and require additional notification obligations, approvals or 'fit and proper' tests. Typically, these restrictions are used to assess the identity, quality and fitness of the new acquirer and are limited to regulated industries (eg, banking, insurance, investment, pensions, telecoms, aviation, gambling, and in some respects gas and electricity). Furthermore, M&A activities within certain sensitive – mainly public order and safety-related – industries may require approval by the Austrian Ministry for Economic Affairs (for the latter, see 2.3 Restrictions on Foreign Investments and 2.6 National Security Review, below). Public takeovers of shares in Austrian listed entities falling within the Austrian Takeover Act are regulated and supervised by the Austrian Takeover Commission (Übernahmekommission).
Dependent on Asset Class
With regard to real estate, acquisitions may in limited circumstances be subject to notification or approval by regional land transfer authorities (Grundverkehrsbehörde) (see 2.3 Restrictions on Foreign Investments, below).
By and large, direct inward investments are usually freely available. Apart from restrictions that may be equally relevant for Austrian investors (eg, notification duties in cases of acquisition of certain share percentages in Austrian listed companies and approval/non-prohibition of the acquisition of certain qualified shareholdings in the financial sector), restrictions that may in particular also have relevance to foreign investors mainly relate to:
The relevant pieces of merger legislation are the Austrian Cartel Act 2005 (Kartellgesetz 2005) and the EU Merger Control Regulation (Regulation (EC) No 139/2004). Depending on turnover thresholds, transactions of a certain size become subject to the requirement of merger control clearance by either the Federal Competition Authority or the European Commission. The European Commission has exclusive jurisdiction if the transaction results in concentrations with an EU dimension. Where a transaction does not fall within the exclusive jurisdiction of the European Commission, it may require (pre-merger) notification to and clearance by the Federal Competition Authority.
The Austrian merger control regime catches several corporate transactions, such as the direct or indirect acquisition of shares, if a shareholding of 25% or 50% is attained or exceeded, any other combination (even below this threshold) enabling the buyer to exercise a controlling influence on the target or joint ventures. These concentrations have to be notified to the Federal Competition Authority if the following turnover thresholds are fulfilled cumulatively in the last business year immediately preceding the transaction in question:
However, concentrations exceeding these turnover thresholds are exempt from mandatory notification if only one undertaking achieved a turnover in Austria of more than EUR5 million and the other undertaking(s) achieved an aggregate turnover of not more than EUR30 million worldwide.
Furthermore, an additional threshold has applied under Austrian merger control law since 1 November 2017. This additional threshold is linked not only to the turnover of the undertakings involved, but also to the transaction value. Specifically, concentrations meeting the following thresholds must in future be notified to the Federal Competition Authority:
Within one month of receiving the complete notification, the Federal Competition Authority and the Federal Cartel Prosecutor conduct an initial assessment (Phase I) and, most commonly, following the transaction is cleared at the end of that period. In more critical cases, the Federal Competition Authority or the Federal Cartel Prosecutor initiates the main examination proceedings (Phase II). Here, the Cartel Court has five months to finalise the investigations, consider whether the transaction creates or strengthens a dominant market position and finally either clears the transaction (which may be subject to conditions and/or obligations) or prohibits it (which is quite rare in practice).
In particular, an acquirer has to consider the following rules:
In accordance with the Foreign Trade Act 2011, Section 25a, Austrian companies operating in areas of internal and external security (the defence industry, security services, etc) or general public services, including social security (particularly healthcare, energy or water supply, telecommunication services, traffic or education) are protected against acquisitions by foreigners by the statutory requirement of an approval of the Austrian Ministry for Economic Affairs.
Generally, the requirement of ministerial approval applies to acquisitions of domestic listed and non-listed companies by foreign investors that are not residents or citizens of the EU, the EEA or Switzerland. In particular, the Foreign Trade Act 2011 involves three scenarios:
For the purpose of calculating the threshold triggering the approval requirement, shares of buyers acting in concert as well as persons having agreed to jointly exercise their voting rights have to be aggregated.
The request for approval has to be filed prior to signing of the respective acquisition documents. Within one month (in case of a more detailed assessment, within another two months) the Ministry for Economic Affairs decides on the request for approval, which is deemed cleared if no decree is issued within the aforementioned period. Where there is deemed to be a 'serious threat' to the interests of public security and order, the approval may be subject to conditions (which are not specified in further detail). Prior to the approval, an acquisition subject to the Foreign Trade Act 2011 must not be implemented.