AUSTRIA Law and Practice Contributed by: Horst Ebhardt, Philipp Kapl, Hartwig Kienast and Matija Bernat, Kinstellar
Financing conditions (so-called “financing-out” claus - es) are unusual in Austria and strongly resisted by sell - ers. Buyers, especially PE funds, are expected to have committed funds in place at signing. “Certain funds” undertakings constitute standard market practice. Shareholder approval conditions are rare and only rel - evant in exceptional cases (eg, if the buyer or seller is a listed company or subject to special internal govern - ance constraints). MAC clauses as conditions to closing are almost nev - er seen in Austrian PE transactions. If used, they are narrowly defined and heavily negotiated. PE sellers generally resist such clauses. 6.5 “Hell or High Water” Undertakings Regulatory Undertakings in Austrian PE Transactions PE buyers are generally reluctant to accept full “hell or high water” undertakings in transactions subject to regulatory conditions. Such commitments – which require the buyer to comply with all competition authority remedies unconditionally – are often heav - ily negotiated, limited or excluded altogether. Instead, buyers typically agree to extensive co-operation and information obligations without an outright obligation of having to accept any and all imposed conditions. In some cases, parties to a transaction have agreed to a “corridor” of conditions that have to be accepted by the buyer, typically measured by way of the adverse financial impact that would fall on the buyer group if it were to accept the conditions imposed. “Hell or high water” obligations are historically more relevant in MC, where conditions such as divestments are commonly required. Increasingly, the FDI authority imposes conditions in approval decisions, although the substance of such conditions has thus far not reached a dimension that would make compliance by buyers overly costly. 6.6 Break Fees Break fees in favour of the seller are often seen in PE transactions. Break fees typically range between 1% and 3% of the purchase price and are triggered by events such as the buyer’s failure to obtain required approvals (despite a best effort obligation) or a fail -
ure to close without due cause. Austrian law permits break fees, but they are typically subject to mandatory mitigation by courts (such mitigation option cannot be waived by the parties to the share purchase agree - ment). Reverse break fees – where the purchaser agrees to pay the seller a fixed amount if the transaction fails due to the buyer’s fault – are also not uncommon in Austrian PE transactions. 6.7 Termination Rights in Acquisition Documentation PE sellers and buyers can typically terminate an acquisition agreement under narrow, contractually defined circumstances. The most common grounds for termination include the failure by a party to satisfy a condition precedent (such as regulatory approval) prior to the agreed long-stop date, or the failure by a party to complete the transaction prior to the long- stop date. The typical long-stop date in Austrian PE transactions ranges from six to 18 months after signing, depending on the complexity of required regulatory clearances. 6.8 Allocation of Risk Risk Allocation in Austrian M&A Transactions: PE v Corporate Parties The typical allocation of risk differs noticeably depend - ing on whether the seller or buyer is PE-backed or a corporate entity. These differences are particularly evident in the scope of warranties, liability limitations, transaction structures and the use of W&I insurance. PE sellers generally aim for a “clean exit” and there - fore seek to limit their post-closing liability to the greatest extent possible. To address buyer concerns, W&I insurance is more often used, allowing the seller to limit or exclude its liability under the sale and pur - chase agreement. Escrow arrangements or holdbacks are usually avoided, with purchase price payments structured to be made in full at closing. By contrast, corporate sellers are often more will - ing to accept broader warranty coverage and higher liability caps, particularly in cases where reputational considerations or long-term business relationships are
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