AUSTRIA Law and Practice Contributed by: Horst Ebhardt, Philipp Kapl, Hartwig Kienast and Matija Bernat, Kinstellar
PE-backed buyers in Austria are generally subject to the same regulatory requirements as other acquirers, particularly under FDI screening and MC rules. Regu - latory scrutiny increases when investors involve com - plex 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 struc - tures is critical to avoid delays or regulatory risks. The Foreign Subsidies Regulation (FSR) has been rel - evant 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 disad - vantages 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 compli - ance (especially regarding Russia) and ESG require - ments 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.
tions 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 coun - sel 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. 4.2 Vendor Due Diligence Vendor due diligence is a common feature in Austrian PE transactions, especially in structured auction pro - cesses 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 typi - cally 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 con - tract to the buyer (a practical issue that can be over - come 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 unwant - ed liabilities, and typically do not require a notarial 5. Structure of Transactions 5.1 Structure of the Acquisition
4. Due Diligence 4.1 General Information
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 trans - actions, 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 transac -
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