M&A and Governance Practice Area Review: Austria

Clemens Philipp Schindler, Schindler Attorneys

In this article, Clemens Philipp Schindler at Schindler Attorneys assesses the Austrian corporate market over the past year, including deal activity and developments across various sectors from real estate and financial services to TMT and energy.

M and A

Deal Activity and Statistics

According to a recent study in M&A Review (2018), Austria saw approximately 409 deals in 2017, an increase of 4.9 per cent from 2016. This makes 2017 one of the top years since 1988, with the years 2000 to 2007 being the strongest, peaking in 2005 with over 500 deals. According to the EY M&A Index Austria (2017), the deal volume rose from €10.7 billion in 2016 to €14.7 billion in 2017. This raise was mainly driven by the takeover offer by Vonovia to BUWOG shareholders (€5.6 billion), the acquisition of UPC Austria by T-Mobile Austria (€1.9 billion), the acquisition of a stake in the Russian gas field Yuzhno-Russkoye by OMV (€1.7 billion) and the acquisition of a real estate portfolio of RFR-Holding GmbH by SIGNA (€1.5 billion). Due to these large transactions, the average deal volume of all M&A transactions involving Austria rose from €30.2 million to €42.7 million.

The statistics published in M&A Review show that in 2017:

  • 31 per cent of deals were domestic, compared to 37 per cent in 2016; 
  • 33 per cent of deals were outbound (acquisitions of foreign targets by Austrian investors), compared to 44 per cent in 2016; 
  • 24 per cent of deals were inbound (acquisitions of Austrian targets by foreign investors) compared to 17 per cent in 2016; and 
  • 11 per cent of deals involved only an Austrian seller, but a foreign target and a foreign buyer. This is compared to 3 per cent in 2016.

According to the EY M&A-Index Austria 2017, 28 per cent of inbound acquisitions were made by German investors, while 32.6 per cent were made by investors from other European countries. Thus, 60.6 per cent of all foreign investors were European. In terms of transaction volume, European investors accounted for 90.3 per cent, and German investors accounted for 86.8 per cent.

Regarding outbound transactions, the EY M&A-Index Austria 2017 reports that Germany is the most attractive market, with 35.3 per cent of the deals. Meanwhile, 48.3 per cent of the outbound deals were made in other European countries. 

Thus, with 83.6 per cent of outbound transactions, Europe is clearly the preferred investment target of Austrian investors. In terms of transaction volume, Germany accounted for 41.5 per cent of outbound transactions, Russia for 38.7 per cent, and European countries (other than Germany) for 17.3 per cent.

As in recent years, the most sought-after targets in 2017 were from the general service sector, IT and telecoms, as well as electrical and medical engineering. For food and beverages it was also a strong year, with the number of deals having doubled. Following a stagnation in 2016, the financial sector has seen an increase in 2017 (34 deals compared to 29). There was a decline in the following sectors:

  • energy and waste management: 22 deals compared to 27;
  • transport and traffic: eight deals compared to 13; and 
  • media and publishing: eight deals compared to 12. 

M&A activity in the other sectors remained stable.

Transactions by financial investors remain the exception in 2017, with strategic investors accounting for 94 per cent of all transactions according to the EY M&A-Index Austria 2017. 

Overall, the Austrian M&A market has consolidated at a high level. The main drivers were the continuing low interest-rate environment, resulting in large transactions in the real estate sector; and digital transformation, promoting investors’ interest in Austrian tech companies.

Real Estate

In 2017, activity in the real estate sector remained remarkably busy. Most notably, Vonovia made its takeover offer to BUWOG shareholders, the largest announced transaction in Austria in 2017. The takeover offer was accepted by over 70 per cent of the shareholders by early 2018. 

Listed company S Immo was also in the spotlight. Investor Ronny Pecik acquired a total of 21.86 per cent of S Immo shares in two tranches, and Austria’s largest privately owned real estate company Signa acquired options on these shares. Rather surprisingly Ronny Pecik and Signa sold their shares to listed Immofinanz, which also owns 26 per cent of CA Immo; but plans for a merger have been abandoned. 

In Germany, Signa launched a takeover offer for Kaufhof for €3 billion. Recently, Starwood Capital Group launched tender offers for a 26 per cent stake in CA Immo and a 5 per cent stake in Immofinanz.

As well as public M&A matters, there have also been many private transactions involving real estate companies. In this area Signa has shown significant deal activity. It sold its office construction project, the Icon Vienna, to Allianz Real Estate for over €500 million. It also sold three buildings in the Austria Campus office complex to PGIM Real Estate for €530 million. 

Signa was additionally involved in some prominent buy-side transactions. As part of a 50/50 joint venture with real estate investment manager Invester United Benefits, it acquired the BAI Group (which offers project and property development, estate agent services and property management) from UniCredit Bank Austria. Signa also acquired a real estate portfolio in Germany from RFR for €1.5 billion, comprising assets in Berlin, Hamburg, Frankfurt and Munich.

Listed Austrian real estate companies have been busy in real estate transactions. S Immo sold office buildings to Germany’s Deka Immobilien for €235 million. 

In another noteworthy deal, Immofinanz sold five Moscow shopping malls to Russia’s Fort Group for €900 million. 

CA Immo acquired the office building Warsaw Square, building B from project developer Ghelamco Poland. In a sell-side transaction, CA Immo disposed of its participation in Frankfurt office tower Tower 185.

There have been many more real estate transactions occurring in 2017 and 2018. Reitenburg purchased two office buildings in Vienna, which are mainly rented to A1 Telekom. 

Corestate acquired a residential tower project, with 670 micro-apartments for students and young professionals, from Soravia Equity and ARE Development in a forward-purchase transaction.

Cologne-based project development and investment company Art-Invest Real Estate Funds purchased the Millennium Tower, a prominent Vienna building, from a Morgan Stanley real estate fund and CC Real. The acquisition is Art-Invest’s first strategic investment outside Germany.

Aachener Grundvermögen acquired a retail property in central Vienna from coffee manufacturer Julius Meinl, marking its first real estate investment in Austria.

German property developer Log4Real purchased a land plot near the Vienna airport in order to build a logistics building and invest €135 million. 

South African real estate developer Accelerate Property Fund acquired nine hardware store buildings – six in Austria and three in Slovakia – from Supernova for a purchase price of €82.1 million. 

Austrian bad bank Heta Asset Resolution sold its Croatian resort Skiper to Istrian Hotels. 

Property developer WAG Wohnungsanlagen Gesellschaft mbH agreed to acquire Kallco Bauträger GmbH, a company engaged in building, renting and selling residential and office properties, from investor Winfried Kallinger. 

Real estate company UBM Development AG and two private investors acquired Ekazent Immobilien Management GmbH, a real estate developer and service provider, from UniCredit Bank Austria AG. 

Real estate development companies NV Immobilien GmbH and Cabus Projektentwicklung GmbH acquired a 52 per cent stake in real estate developer NOE Immobilien Development AG from Hypo Noe Gruppe Bank AG. 

Recently, private equity investor Ares Management acquired a real estate portfolio, comprising office space in Germany, the Netherlands, Finland and Austria, from Amundi Asset Management, including the Florido Tower in Vienna. 

Financial Services

There were some major financial services transactions in 2017. BAWAG subsidiary easybank purchased the financial service provider Six’s Austrian credit and prepaid card business, to continue the business under the brand “Paylife”.

Erste Group’s subsidiaries Tirolinvest and Erste-Sparinvest were merged. In another banking merger, Hypo Noe Landesbank AG merged with its shareholder Hypo Noe Gruppe Bank AG. 

Porsche Bank acquired a 85 per cent stake in Volkswagen Versicherungsdienst GmbH Österreich. 

Walser Privatbank sold its subsidiary Raiffeisen Privatbank Liechtenstein to Hong Kong-based Mason Group for 58.6 million Swiss francs. 

Arca Capital acquired a 61 per cent stake in publicly listed Wiener Privatbank for €36.9 million. Closing is expected to occur in June 2018. 

Liechtensteinische Landesbank AG (LLB) agreed to acquire Semper Constantia Privatbank from Hans Peter Haselsteiner and other investors for a consideration of €185 million. Closing is expected to happen in July 2018, and Semper Constantia will thereafter be merged with LLB. 

Austrian retail bank Volksbank Wien AG acquired Austrian cooperative bank Sparda-Bank Austria eGen. 

Austrian pension fund VBV-Pensionskasse AG acquired EVN-Pensionskasse Aktiengesellschaft, an Austrian pension fund manager, from listed Austrian energy company Energie-Versorgung-Niederösterreich AG.

Chinese HNA Group agreed to acquire an 88.1 per cent stake in C-QUADRAT Investment AG, an Austrian asset management company.

Telecoms and Media

Several telecoms and media transactions occurred in 2017. Most notably, T-Mobile Austria, a subsidiary of Deutsche Telekom, acquired UPC, an Austrian company providing broadband internet, cable television and telephony services, from Liberty Global for €1.9 billion. 

Other telecoms companies were busy as well. Hutchison Drei acquired its competitor Tele 2 for €95 million, thereby expanding its offering to many business clients. 

Telekom Austria, majority-owned by telecoms giant América Móvil, increased its participation in its Macedonian subsidiary one.Vip to 100 per cent by acquiring a 45 per cent share, previously held by Telekom Slovenije, for €120 million.

Media transactions included Dentsu Aegis’ acquisition of media.at GmbH, Austria’s second largest media agency, from A1 Telekom, Österreichische Lotterien, Österreichische Post, BAWAG and Industriellenvereinigung. 

Media house Kurier acquired the regional TV station Schau-TV from Schau Media Wien. 

Austrian Siemens subsidiary Convergence Creators, a provider of digital transformation solutions, was acquired by French IT service provider Atos. 

Beta Film GmbH, a German distributor of TV licence rights, agreed to acquire a 50.8 per cent stake in MR-Film Kurt Mrkwicka Gesellschaft mbH, an Austrian film production company. 

Austrian BK Invest GmbH acquired atms Telefon- und Marketing Services GmbH, the Austrian provider of telecommunications-based customer dialog solutions, from Germany’s dtms converting communication GmbH.

German Autoscout24 GmbH, a subsidiary of Scout24 group, acquired the Styrian advertising portal gebrauchtwagen.at. 

US-based IMS Internet Media Services acquired a 51 per cent stake in Httpool, an Austria-based online advertising provider, thereby expanding its market across Europe and Asia.

Swiss private equity firm Investnet AG agreed to acquire an 80 per cent stake in FirmenABC Marketing GmbH, an Austrian online marketing business which also operates corporate information portals, from Klaus Rebernig and Manfred Gansch. 

Austrian printing and publishing company Herold Druck und Verlag Aktiengesellschaft agreed to acquire Austrian printing company Paul Gerin GmbH & Co KG from Christian Swarovski and Marlis Gerin-Swarovski.

Recently, THQ Nordic AB, a Swedish developer and publisher of PC and console games, acquired Koch Media GmbH, an Austrian producer and marketer of digital entertainment products and accessories, from private investor Lars Wingefors for a consideration of €121 million.

IT

IT companies remained popular targets. Swiss pharmaceutical giant Roche acquired Austrian app provider MySugr, thereby increasing its presence on the diabetics market. Following the sales of Runtastic and Shpock, the MySugr transaction was the third big sale of an Austrian app provider within two years.

German machine tool manufacturer Trumpf invested a seven-figure sum in innovative technology firm Xarion Laser Acoustics. 

Insight Venture acquired a majority stake in Vienna software company Tricentis. The investment was made by the subscription of new shares and by the purchase of existing shares from existing shareholders. 

Swedish media group Bonnier acquired a 51 per cent stake in software provider KnowledgeFox, a company distributing a microlearning program.

American source-to-pay software provider Jaggaer merged with Vienna direct procurement specialist Pool4Tool.

US database specialist Idera acquired the Austrian software developer Ranorex, specialised in automated tests. Dialog Semiconductor Plc, a listed UK supplier of mixed signal and system level integrated circuit solutions for wireless, automotive and industrial applications, acquired the Austrian LED backlight technology and product portfolio of ams AG, a listed Austrian designer and manufacturer of high performance analogue and mixed signal solutions. 

Idera, a US provider of application and server management solutions, acquired Ranorex GmbH, an Austrian provider of software automation framework. Germany’s Kisters AG acquired IRM AG, an Austrian company offering software solutions in the energy sector, from US-based OpenLink Financial. 

Listed German company XING AG acquired Prescreen GmbH, an Austria-based developer of HR recruiting software, from Kizoo Technology Ventures, for a consideration of €17 million. 

Listed France-based company Schneider Electric SA acquired nxtControl GmbH, an Austrian developer of automation software and hardware, from Austrian private equity firms TecNet Equity and eQventure. 

Listed German firm Bechtle AG acquired Ulbel & Freidorfer GmbH, an Austrian provider of IT solutions. 

Private equity firm Castik Capital acquired a majority stake in inet-logistics GmbH, an Austrian software provider for transport management, freight costing, container management and transportation analytics, from transport and logistics firm Gebrüder Weiss Gesellschaft mbH.

Machinery and Plant Engineering, Industrial Goods

Swiss plant manufacturer ABB acquired the Austrian automatization specialist Bernecker & Rainer for US$2 billion.

RHI Magnesita sold two dolomite rock plants in Italy and Spain to German Intocast AG. The transaction was made to fulfil merger-control requirements imposed by the European Commission in connection with the RHI-Magnesita merger. In another deal, RHI sold its subsidiaries in Italy and Russia to Livia Corporate Development. 

In a buy-side transaction, RHI Magnesita acquired Swedish Agellis Group, thereby expanding its offering in measurement technology. 

TowerBrook Capital Partners acquired pulp manufacturer Schweighofer Fiber from Schweighofer group. 

Mann + Hummel purchased Jack Filter, a specialist in ventilation and air conditioning technology. 

RAG-Stiftung acquired a 25 per cent stake in Austrian machinery and plant engineering company GAW.

Austrian rope manufacturer Teufelberger acquired Italian steel rope manufacturer Redaelli Tecna from Russian steel group Severstal, thereby expanding its offering to ropes of larger diameters. 

In its largest buy-side transaction to date, Carbide producer Ceratizit acquired German tool manufacturer Komet Group, a company with 1,500 employees. The Wuppermann sheet metal processing plant in Thalgau was – together with foreign Wuppermann companies – sold to investment company Lafayette Mittelstand Capital. 

Haas Group, a manufacturer of machines for the production of waffles, biscuits and sweets, was acquired by Swiss Bühler Group. HTI High Tech Industries agreed to sell its plastic injection moulding business to Nanogate for €14 million. Saxus Beteiligungsverwaltungs GmbH, an Austrian holding company, agreed to acquire FMW Industrieanlagenbau GmbH, an Austrian company offering project solutions for pulp/paper and mineral technology applications, from Swiss investors Cornelius Grupp and Matthias Calice. 

MGG Netherlands BV acquired a majority stake in CSA Herzogenburg GmbH, an Austrian cutting-edge, high-quality manufacturer of advanced aluminum low-pressure die casted products and subassemblies, from Austrian investors Andreas Zick and Markus Kieberger. 

Singapore-based Accuron Technologies Limited acquired mechatronic systemtechnik GmbH, an Austrian manufacturer of automated wafer handling systems for the advanced semiconductor industry, from German private equity firm Fidura Private Equity Fonds and Austrian private equity firm Danube Equity. 

Listed UK company Synthomer plc agreed to acquire the Austrian Styrene Butadiene Rubber business of listed German chemical company BASF SE, for a consideration of €30 million. 

Germany-based KSG Leiterplatten GmbH acquired Häusermann GmbH, an Austrian manufacturer of printed circuit boards and input systems. 

PIA Automation Holding GmbH agreed to acquire M&R Automation GmbH, an Austrian developer and manufacturer of custom-made production lines and testing systems for automotive, electronics, consumer goods, pharmaceutical and medical industries, from German private equity firm Quadriga Capital. 

Listed Thai company Indorama Ventures agreed to acquire Glanzstoff Group, an Austrian manufacturer of technical yarns, cords and fabrics for the rubber and composite industries, from CAG Holding Gesellschaft mbH.

Czech MTX Group as agreed to acquire Aluminum Lend Gesellschaft mbH, an Austrian manufacturer of steel castings including alloy, bushings and rolling mill rolls. 

German machinery manufacturer Fliegl Agrartechnik GmbH acquired Hangler Fahrzeugbau Gesellschaft mbH, an Austrian manufacturer of trailers, semitrailers, truck bodies and special vehicles. 

Swiss chemicals manufacturer Sika AG agreed to acquire Bitbau Dorr GmbH, an Austrian manufacturer of waterproofing systems. 

Austria-based private equity firms OOe Betfonds and Invest Unternehmensbeteiligungs Aktiengesellschaft, together with the management of Lenzing Plastics GmbH & Co KG, an Austrian manufacturer of products made from thermoplastic materials and fluoropolymers, agreed to acquire a 30 per cent stake in the company, from German private equity firm Nord Holding Unternehmensbeteiligungsgesellschaft mbH. 

German private equity fund DPE Deutsche Private Equity Management III GmbH acquired a 70 per cent stake in VTU Holding GmbH, an Austria-based engineering company which designs plants for the process industry. 

Recently, listed Alten Group acquired the Austrian engineering company Kämmerer GmbH through its German subsidiary Alten Europe.

Retail and food industries

MTH Retail Group acquired Swiss office supplies company OWiba AG from Migros-Genossenschafts-Bund. 

Austrian supermarket chain Spar purchased the Croatian Billa supermarkets from German REWE Group. 

AVAG Holding SE, a German owner and operator of automotive dealerships, acquired eight automotive dealerships from Austrian car dealer Wiesenthal. 

Food producers were also sought-after targets. Vivatis purchased frozen food producer Frisch & Frost from Lamb Weston/Meijer and Raiffeisen Ware Austria. 

Hannover Finanz acquired a stake of over 30 per cent in Sporternährung Mitteregger, a producer of food supplements for athletes. 

Ankerbrot purchased a 65 per cent stake in wholesale bakery Linauer & Wagner. 

Norbert Marcher GmbH, an Austrian animal husbandry and meat processing company, agreed to acquire Landhof GesmbH & Co KG and H Loidl Wurstproduktions- und Vertriebsges mbH & Co KG, Austrian manufacturers of sausages and meat, from Vivatis Holding AG. 

German Ariana Holding GmbH acquired Biomerx Vermögensverwaltung GmbH, an Austrian provider of microbiological and analytical consulting and testing services for the food and agricultural industries. 

US-based Cargill agreed to acquire a minority stake in Delacon Biotechnik GmbH, an Austrian company specialised in the research, development and production of natural feed additives.

Belgian company Puratos Group NV acquired Diamant Nahrungsmittel GmbH, an Austrian manufacturer of baking and confectionary products, from German conglomerate group Wilh. Werhahn KG.

The sale of BackWerk Group by private equity investor EQT to Swiss strategic investor Valora also had a local angle, since Austria is one of the five markets outside Germany.

In the retail sector the takeover bid by Chinese Fosun Group for the listed lingerie specialist Wolford attracted much attention. On this transaction Fuson outbid private equity investor OpCapita in the final stage of the process initiated by Wolford majority shareholders in connection with a restructuring plan. In connection with such purchase a public takeover bid for all outstanding shares in Wolford had been launched. 

On the sell side OpCapita is expected to sell fashion retailer NKD Group through an auction process with Austria and other CEE jurisdictions being among their main markets outside Germany.

Energy and waste disposal

Listed Austrian oil and natural gas group OMV acquired a 25 per cent stake in the Russian gas field Yuzhno-Russkoye for €1.7 billion. 

In another large transaction, OMV sold its Turkish service station chain for €1.37 billion to VIP Tukey Enerji, a company of Vitol Group. Furthermore, OMV acquired a 40 per cent stake in Smatrics GmbH & Co KG, a provider of charging points for electric cars, from listed Austrian energy company Verbund AG. 

Chinese-listed United Energy Group acquired Pakistan oil and gas assets through the purchase of an Austrian subsidiary of OMV. 

Chinese Haier Group acquired a majority interest in Greenonetec, an Austrian producer of thermal solar collectors, for a consideration of €14.4 million. 

Petro Welt Technologies (previously CAT Oil) acquired a Russian proppant factory for €18.5 million from Carbo Ceramics. 

Doppler Group acquired oil trader and service station operator Fazeni. 

Loacker Recycling increased its stake in waste disposal company Häusle to a majority shareholding. 

Stina Resources, a listed Canadian mineral exploration company, agreed to acquire

Gildemeister Energy Storage GmbH, an Austrian company providing integrated solutions for energy management for industrial customers and municipalities, for a consideration of €5.21 million. 

Austrian Müller-Guttenbrunn Group agreed to acquire a 35.73 per cent stake in MBA Polymers Austria Kunststoffverarbeitung GmbH, an Austrian plastics recycling company, from US-based MBA Polymers.

ENGIE Energie GmbH, an Austrian energy supplier, acquired treeeco Energiecontracting GmbH, an Austrian company designing, implementing and operating tailored energy systems based on renewable raw materials. 

Energie AG Oberösterreich acquired hydro power facilities in Steyrermühl from listed Finland-based UPM Corporation. 

Austria-based gas station operator Doppler Mineralöle GmbH agreed to acquire its competitor Bildstein GmbH & Co KG. 

The Roth family foundation agreed to sell a portfolio of gas stations that it had acquired from Hungarian energy giant MOL in 2015.

Paper, wood and packaging

Austrian packaging group Constantia Flexibles sold its labels division to US Multi-Color Corporation for €1.15 billion.

Austrian Binderholz Group acquired German wood manufacturer Klenk Holz from the Carlyle Group. 

Germany-based private equity and venture capital firm Pinova Capital GmbH acquired Deurowood Produktions GmbH, an Austrian supplier of additives for the paper impregnation industry, from Germany-based Deurotech Group GmbH.

Transport and traffic

Austrian national railway company ÖBB and Swiss rail vehicle manufacturer Stadler Rail set up a joint venture for the maintenance and repair of the Westbahn rail vehicles. 

F. List, a producer of aircraft equipment, expanded its business by acquiring the assets of OHS Aviation Services, a German company under insolvency proceedings. 

Vueling Airlines SA, a Spain-based airline, agreed to acquire Niki Luftfahrt GmbH, an Austria-based provider of airline services, in an insolvency and auction transaction, which had been contested and eventually led to the purchase of Niki by its former founder and Formula One legend Niki Lauda. In another transaction, Niki Lauda agreed to sell a 75 per cent stake in LaudaMotion GmbH, an Austria-based airline operator, to listed Irish low-cost carrier Ryanair Holdings Plc. 

Wanfeng Aviation Industry, a China-based aviation company, acquired Diamond Aircraft Industries GmbH, an Austrian manufacturer of general aviation aircraft and motor gliders, from the Austrian investor Christian Dries.

Construction and construction materials industry

Wienerberger has had a busy year with regard to acquisitions. The Austrian construction materials company expanded its brick business in Romania by acquiring a 98.3 per cent stake in Brikston Construction Solutions SA from ADM Capital. In the US, Wienerberger purchased facing brick producer Columbus Brick through its subsidiary General Shale. 

Austrian manufacturer of concrete pavers Semmelrock International GmbH, a subsidiary of Wienerberger, agreed to sell its Austria-based paver business to the Germany-based manufacturer of cement, concrete, sand and gravel Südbayerisches Portland-Zementwerk Gebr. Wiesböck & Co GmbH. 

JELD-WEN Holding, a listed US manufacturer of doors, agreed to acquire Domoferm GmbH & Co KG, an Austrian provider of steel doors, steel door drames and fire doors, from Austro Holding GmbH and Grosso Holding Gesellschaft mbH. 

Austrian building materials manufacturer Kirchdorfer Industries GmbH agreed to acquire a majority stake in Kammel Ges mbh, an Austrian manufacturer of pre-fabricated building components. 

Listed Austrian construction company Porr AG agreed to acquire G. Hinteregger & Söhne Baugesellschaft mbH, an Austrian construction company, from Brandstetter and Hinteregger families, for a consideration of €29.8 million. 

Austrian private equity firm Invest Unternehmensbeteiligungs Aktiengesellschaft agreed to acquire a 48.99 per cent stake in Isoroc Holding AG, an Austrian producer of organic insulation materials. 

Austrian building materials manufacturer Schmid Industrieholding AG agreed to acquire w&p Baustoffe GmbH, an Austria-based company that manufactures plaster, mortar, screeds, and paints for building construction, from Austrian cement producer WIG Wietersdorfer Holding GmbH. 

Sweden-based incubator Sdiptech AB agreed to acquire 51 per cent stakes in Aufzüge Friedl GmbH, an Austria-based company engaged in installation and servicing of elevators, and ST Liftsystems GmbH, an Austria-based company engaged in manufacturing compact lifts, for a combined consideration of €6.5 million. 

Saudi Arabian Amiantit Company Group, a construction company manufacturing pipe systems, tank systems, valves, water wells, manholes and rubber components and Austrian cement producer WIG Wietersdorfer Holding GmbH agreed to form a 50:50 joint venture.

Gaming

Czech Sazka group increased its participation in Casinos Austria to 34 per cent, thereby becoming its largest individual shareholder. The regulatory approvals were granted in the end of 2017. 

Denmark-based Better Collective A/S acquired SportFreunde Informationsdienste GmbH, an Austrian provider of betting information.

Healthcare

Swiss private equity firms Capvis Equity Partners and Partners Group Holding AG agreed to acquire a majority stake in Amann Girrbach AG, an Austria-based original equipment manufacturer of laboratory equipment for dental technicians and dental laboratories, from US private equity firm TA Associates Management. 

Cyprus-based Agnis Plasma Limited acquired two plasma donation centers of Plasmaspendezentrum Donaustadt GmbH. 

Austrian Sanova Pharma GesmbH agreed to acquire Menges Medizintechnik GmbH, an Austrian distributor of medical devices for operating theatres and radiological facilities, from Manfred Menges. 

Listed French company Orpea SA agreed to acquire Dr. Dr. Wagner GmbH, an Austrian operator of nursing homes, rehabilitation hospitals and health spa hotels. 

Swiss company Medacta International SA acquired Vivamed Medizinprodukte Vertriebs GmbH, an Austrian distributor of medical devices. 

US company LifeNet Health, acquired AlloTiss Gemeinnützige Gewebebank GmbH, an Austrian human tissue bank.

Austrian private equity firm aws-mittelstandsfonds Management GmbH, along with the management of AMI Agency for Medical Innovations GmbH, an Austrian developer and manufacturer of medical products and surgical equipments, acquired the company in a management buyout transaction. 

Other

Salesianer Miettex GmbH, an Austrian provider of laundry services, agreed to acquire Wozabal Management GmbH, an Austrian textile and workwear rental company, for an estimated consideration of €70 million. 

French private equity firm Ardian agreed to acquire a majority stake in CCC Holding GmbH, an Austrian provider of business process and outsourcing (BPO) solutions, from UK private equity firm Silverfleet. An interesting aspect of this transaction is the fact that Ardian had sold CCC to Silverfleet back in 2013.

Raiffeisenverband Salzburg eGen acquired Modelleisenbahn Holding GmbH, an Austrian manufacturer of model trains, from Austrian investor Roland Edenhofer. 

Listed French company Synergie SA agreed to acquire an 80 per cent stake in Völker GmbH Personalbereitstellung, a company engaged in recruitment services, from Austrian private equity firm VMS Value Management Services GmbH. German-based Riedel Communications GmbH & Co. 

KG acquired a majority stake in PIDSO – Propagation Ideas & Solutions GmbH, an Austrian manufacturer of innovative and lightweight antennas and antenna systems. 

Fontem Ventures BV acquired VON ERL. GmbH, an Austrian developer and producer of e-cigarettes. 

Reisecenter Mader Kuoni Reisen GmbH acquired World of Travel Reisebüro GmbH, an Austrian travel agency. The Austria-based Mueller-Just family and Austrian wind energy company ImWindGroup GmbH acquired a 50 per cent stake in Austrian stamp manufacturer Trodat GmbH, from the Austria-based Doppler family.

Legal and regulatory framework

Experience shows that certain restrictions under Austrian corporate law often come as a surprise to foreign investors structuring a deal, particularly financing and intra-group transactions after consummation of the transaction. Austrian law generally prohibits the return of equity to shareholders (ie, upstream and side-stream transactions) of both a limited liability company and a stock corporation (and are applied by the Austrian courts by analogy to limited partnerships with only a limited liability company or stock corporation as unlimited partner). Based on this principle, Austrian courts have established that a company cannot make any payments to its shareholders outside arm’s-length transactions, except in the following instances: 

  • for the distributable balance sheet profit;
  • in a formal reduction of the registered share capital; or 
  • for the surplus following liquidation.

The prohibition on return of equity covers payments and other transactions benefiting a shareholder where no adequate arm’s-length consideration is received in return. To the extent a transaction qualifies as a prohibited return on equity, it is null and void between the shareholder and the subsidiary (and any involved third party, if it knew or should have known of the violation). It may result in liability for damages.

Austrian courts have developed case law suggesting that a subsidiary may lend to a shareholder, or guarantee, or provide a security interest for a shareholder’s loan, if it receives adequate consideration in return; or if it has determined (with due care) that the shareholder is unlikely to default on its payment obligations, and that, even if the shareholder defaults, such default would not put the subsidiary at risk, and that the transaction is in the interest of the Austrian subsidiary (corporate benefit).

In addition, the Austrian Stock Corporation Act prohibits a target company from financing or providing assistance in the financing of the acquisition of its own shares or the shares of its parent company (irrespective of whether or not the transaction constitutes a return of capital). It is debated whether this rule should be applied by analogy to limited liability companies. Transactions violating this rule are valid but may result in liability for damages.

Another area in which capital maintenance problems may arise is that of deal and management fees charged by private equity funds to the Austrian target or an Austrian acquisition vehicle. Again, the arm’s-length standard is relevant to determine the compliance with Austrian law. The same applies to other intra-group transactions.

Furthermore, (foreign) ownership restrictions are another area of interest to many investors (besides the relatively low merger control thresholds in Austria).

In regulated industry sectors (eg, banking, insurance, utilities, gambling, telecoms or aviation) the acquisition of a qualified or a controlling interest is typically subject to advance notification to, or approval of, the competent regulatory authority. Sanctions for failure to notify or obtain approval in advance range from monetary penalties to a suspension of voting rights or a partial or total shutdown.

The acquisition of ownership and certain lease interests in real estate by non-EEA nationals or the acquisition of control over companies owning such interests is subject to notification or approval by the local real estate transfer commission. What interests are covered and whether notification or approval is required varies among the legislation of the nine states in Austria. Where the real estate is used for commercial rather than residential purposes approvals are usually granted.

Under the Foreign Trade Act, the acquisition of an interest of 25 per cent or more, or a controlling interest in an Austrian business by a foreign investor (for purposes of this law, that is an investor domiciled outside of the EU/EEA and Switzerland; if the investor is resident in that region, no advance approval is required, but ex officio investigations can be initiated without time limit) is subject to advance approval by the Austrian minister of economic affairs where that business is involved in internal and external security (for example, defence and security services) or public order and security, including public and emergency services, such as hospitals, emergency and rescue services, energy and water supply, telecommunications, traffic or universities and schools. Transactions subject to approval cannot be completed pending approval. Failure to obtain approval is subject to imprisonment and criminal penalties.

Another frequent topic is the access to documents and information to conduct a due diligence. In this context, certain differences depend on the legal form in which the target is established. 

As a general rule, third parties do not have a right to obtain information from the stock corporation besides those, which are publicly available. The board is thus not obliged to disclose confidential information to a prospective buyer. Even shareholders have very limited information rights. They can request the financial statements including the management report as well as the supervisory board report. Furthermore, shareholders have an individual information right at the shareholders’ meeting in relation to the agenda, and to the extent such information is necessary to properly assess an agenda item. Given that such information will usually not suffice for purposes of a due diligence by a potential investor, shareholders will often request the management to disclose additional information. The decision on the disclosure of confidential information, and thus the decision on the admission or refusal of a due diligence, is a management measure, and thus generally does not require the consent of the supervisory board or the shareholders. The management has to avoid any damage to the company and to consider all potential advantages, risks and disadvantages. Positive impacts may be, for example, new or cheaper means of financing, access to new customers or markets, access to product or technical know-how, advantages for the company’s production or procurement, etc. Negative impacts could, for example, arise, if a competitor or a major supplier or customer of the target can access the information. The decision to allow a due diligence is not necessarily an “all-or-nothing” decision; the greater the interest of the company in due diligence, the more sensitive data can be disclosed. Also the interest of shareholders has to be taken into account by the management, whereby shareholders should generally be treated equal in equal situations. Another aspect to consider is the timeframe. The more advanced the stage of the acquisition process, the more comprehensive and detailed the information that can be made accessible to the buyer. A due diligence will mostly only be permitted if the buyer’s intention to a purchase has become more concrete, for example by signing a letter of intent (LOI). At the same time, the prospective buyer should also sign a non-disclosure agreement (NDA).

The legal situation for limited liability companies is generally comparable to that of stock corporations. Although its shareholders have – de lege lata – only limited access to information rights, the Austrian Supreme Court states that every shareholder has to be granted a comprehensive information claim. Therefore, the managing directors are, in general, obliged to provide requested information to shareholders. However, this information claim does not apply unrestricted. The purpose of the comprehensive information right is to monitor managing directors, to control the business situation of the company and to prepare for general meetings. This information claim should thus only be used for these objectives. Accordingly, parts of Austrian legal literature argue that the information claim would not include a due diligence for the sale of shares, whereas other parts argue that managing directors may not deny access to documents and information for purposes of a due diligence. Overall, a due diligence claim by a shareholder of a limited liability company rather has to be honoured, if and to the extent that it is essential to sell the shares to a potential buyer and the shareholder’s request is not a misuse of the law (eg, if the shareholder intends to dissuade the disclosure of the information to a prospective buyer); but only to the extent that is necessary to sell the shares, and only insofar as the interests of the company are not negatively affected. Concerning the question which information the seller is allowed to share with a potential buyer, the interests of the company in confidentiality against the interests of the shareholder in the dissemination of information must be carefully weighed, and will often require a shareholder resolution (at least in scenarios in which also the sale of the shares as such is subject to shareholders’ approval). The shareholders of a limited liability company are subject to the duty of loyalty of the company and to the other shareholders. The content of loyalty among the shareholders consists in taking due regard to the legitimate interests of the other shareholders even when exercising their voting rights.

Also in M&A, data protection is in the spotlight. The General Data Protection Regulation (GDPR) will go into effect on 25 May 2018. For the seller side in an M&A process, there are important GDPR concerns to be aware of. During a due diligence, there are potential risks of data and privacy breaches, when sensitive information is shared between potential buyers and the seller company. For the buyer side, the company’s GDPR compliance or readiness must be taken into account during the due diligence-process if the potential acquisition target does business in Europe or deals with data related to European citizens, even if the company does not have a physical office location in the EU. GDPR is a comprehensive set of rules and regulations, and there are several important steps organisations must carry out in order to comply, such as a classification of all personal data being processed by the company, performance of risk assessments, implementation of specific processes and notifications of the competent authorities and – in some scenarios – the individuals who have been affected by a breach. Further, individuals have important rights under the GDPR (such as the right to be informed, the right of access and to rectification, right of data portability etc). To avoid fines for non-compliance, companies will need to have an in-depth understanding of where personally identifiable information is stored and processed throughout the organisation and will have to transfer such information into a record of all processing activities. Various opening clauses provide member states with discretion to introduce additional national provisions to further specify the application of the GDPR. In this context, the Austrian legislation provides for that declarations of consent to the processing of personal data lawfully obtained according to the current data protection framework shall remain valid under the GDPR if such declarations also comply with the new regulations of the GDPR. As Austrian case law has already been rather strict in this respect in the past, it can be expected that the need to adapt existing declarations of consent may be lower in Austria compared to other European countries. Compliance can potentially be very expensive and these costs should be considered very carefully when it comes to the purchase price of a target company. Further, fines related to noncompliance with the GDPR can be very high – in some cases up to 4 per cent of the company’s prior year worldwide revenue or up to €20 million. Based on the announcement that the staff of the Austrian data protection authority will be increased significantly, it can be assumed that breaches of the GDPR will soon be taken on seriously.

Recently proposed changes in tax legislation, including proposed CFC as well as the introduction of a legal definition for abuse of law, are expected to have an effect on transaction structures. In this context the inclusion of the (non-)existence of abuse of law in the scope of binding tax rulings is likely to have high practical relevance. Different to other EU member states, the introduction of an interest barrier rule foreseen under the BEPS Anti-Avoidance Directive has been deferred for now. Accordingly, financing structures with unrelated parties should not be challenged by tax authorities. If combined with Intragroup financing limitations, in particular thin capitalisation and the arm’s-length principle, have to be observed.

 Future Developments

The outlook for the rest of 2018 is rather difficult due to macroeconomic developments that may change the current investment environment in Europe and internationally. Generally, the first quarter of 2018 was very active, based on the assumption that the economy remains stable, the Austrian M&A market should continue its strong performance. This is also supported by the fact that, in particular, private equity firms hold substantial cash reserves to be invested and many of their portfolio companies are overdue to be sold again.

The author would like to acknowledge the contribution of Gregor Petric in relation to the market overview and deal monitor in the first part of the article.

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