AUSTRIA Law and Practice Contributed by: Horst Ebhardt, Philipp Kapl, Hartwig Kienast and Matija Bernat, Kinstellar
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. 1.2 Market Activity and Impact of Macro- Economic Factors The PE market in Austria is demonstrating growing appetite for investments in innovative technology- driven businesses and sustainability-focused com - panies. This trend reflects both increasing investor demand for ESG-aligned assets and the country’s strong positioning as a regional hub for green tech - nologies 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, com - panies relying on complex supply chains, or high-tariff sales markets). 2. Private Equity Developments 2.1 Impact of Legal Developments on Funds and Transactions The newly introduced corporate form of the Flexible Corporation (FlexCo) is relatively popular with the start-up sector, making it the main area of applica - tion. By mid-2025, approximately 1,200 FlexCos had already been established across Austria – an indica - tion 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 estab - lished 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 Flex -
Co from emerging as a viable alternative to the more established GmbH structure. As part of the EU’s effort to “strengthen competi - tiveness”, the application of two major sustainability directives has been postponed. The Corporate Sus - tainability 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 Sustain - ability Reporting Directive (CSRD), which mandates extensive ESG disclosures, has been postponed by two years. Large companies (with over 250 employ - ees) must now begin reporting in 2028, while listed SMEs will follow in 2029. These delays give compa - nies additional time to prepare, but the emerging need for ESG compliance remains a growing due diligence and transactional focus. 3. Regulatory Framework 3.1 Primary Regulators and Regulatory Issues 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, requir - ing mandatory approval for investments in sensitive sectors (eg, health, energy, critical technology), even for minority stakes. • The Federal Competition Authority ( Bundeswettbe- werbsbehörde – 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 nul - lity of the underlying transaction, it is typically recom - mendable to seek FDI clearance.
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