Regulatory approvals on an Austrian business acquisition: merger control, trade law, investment screening

Merger control is one of the first fields to look at. If the planned concentration reaches certain turnover thresholds, it must be notified under the Cartel Act to the Federal Competition Authority. Decisive are the worldwide and domestic turnovers of the parties. Where an EU-wide dimension exists, the EU merger control can apply instead of the national notification. Which route fits has to be checked case by case on the basis of the turnovers.

Until clearance there is a standstill obligation. Whoever completes the deal prematurely risks substantial sanctions, consequences relating to the ineffectiveness of completion and reputational damage. In practice the notification is therefore prepared early, often in parallel with the final phase of the negotiation. The contract should expressly name the clearance as a condition to completion and allocate responsibility for the notification.

Not every acquisition is notifiable under merger control. For smaller takeovers below the thresholds the procedure does not apply at all; here a documentation of the check result suffices. A deeper look at conditions to completion is offered by the post on closing conditions.

Trade law poses a different question: which authority the acquirer needs to continue the activity of the target company. On a share deal the company remains the holder of the trade authorisation, but a new trade-law managing director may become necessary if the previous person steps down. On an asset deal the acquirer must hold the necessary trade authorisation itself or secure a trade-law internal relationship, because the authorisation does not pass automatically.

In addition there are sectoral permits attached to particular activities. Banks need a licence under the Banking Act, insurers under the Insurance Supervision Act, energy providers under the relevant energy laws, residential care and nursing operations under the provincial rules. Gambling law, pharmacy law and medical professional law also have their own rules on takeover.

Before an acquisition in a regulated sector it should therefore be checked which authorisations the target company holds, whether they are personal or company-based and which procedures a change of ownership triggers. An initial assessment of the risks is provided by our M&A transaction risk profile.

If real estate is part of the acquisition, real-estate transfer law has to be checked. Agricultural and forestry land is subject, depending on the province, to a real-estate transfer approval or notification procedure. On the acquisition of building land, depending on the location, rules to prevent secondary residences or to secure the primary residence may apply. On a share deal it has to be checked whether an indirect acquisition of real estate equally touches real-estate transfer law.

For acquirers from third countries or for participations in companies in sensitive sectors investment screening under the Investment Control Act has to be checked. Covered are in particular critical infrastructures, security-relevant technologies and certain supply areas. The check is carried out by the competent ministry, the standstill obligation before clearance is strict here too. Which acquisitions fall under the act depends on the activity of the target company and the size of the participation.

Here too: a blanket assumption is not helpful. Investment screening and real-estate transfer law are applicable depending on the facts or not and belong in any case as separate review steps to the preparation. How an asset deal takes over real estate is covered by the post on real estate in the asset deal.

Once the check has shown which procedures are concretely necessary, these belong as conditions to completion in the purchase contract. Each condition should be named individually, allocated to a responsibility and equipped with a cooperation duty. The handling of conditions or obligations that an authority may impose in the procedure should also be governed contractually. Otherwise new negotiation need arises during the proceedings.

The long-stop date orients itself to the longest procedure. Whoever sets the date too tightly risks the transaction failing at the end on an open procedure that could never have been done in time. A realistic date with a buffer avoids this trap. Procedural times are not uniform; phase-I merger procedures run shorter than sectoral approval procedures with hearings of interested parties.

Finally cost allocation needs to be clarified. It is usual for the acquirer to bear the costs of procedures it needs, while the seller pays for the cost of providing documents. The allocation of possible costs of regulatory conditions should also be governed contractually. How purchase price and completion mechanics respond to this is covered by the post on the purchase price adjustment.