AUSTRIA Law and Practice Contributed by: Horst Ebhardt, Philipp Kapl, Hartwig Kienast and Matija Bernat, Kinstellar
6.3 Dispute Resolution for Consideration Structures The use of dispute resolution mechanisms in PE trans - actions depends largely on the type of consideration structure. In locked-box structures, disputes are rel - atively 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 mani - fest error or fraud. This is standard market practice in Austria. For earn-out provisions, expert or hybrid mechanisms are also commonly used, especially when perfor - mance 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 compo - nents. 6.4 Conditionality in Acquisition Documentation 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/clos - ing risk. Regulatory approvals (especially MC and FDI clearance) are typically the only accepted conditions precedent, as they are mandatory and suspensory in nature.
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 spe - cific performance targets. On the other hand, PE sell - ers 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 fre - quently 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 mecha - nisms like locked-box pricing and avoiding earn-outs or complex post-closing adjustments. 6.2 Locked-Box Consideration Structures 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 sign - ing/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 mecha - nisms 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.
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