[Last updated: 1 January 2025, unless otherwise noted]

6.1  Hostile vs. friendly transactions

As mentioned above, Austria has implemented the so-called non-frustration rule, essentially outlawing most forms of post-bid defensive actions by the target board. However, given the traditionally concentrated ownership structures of most Austrian listed companies, only relatively few hostile transactions have taken place in the Austrian market in the past.

Over the past decade, the number of listed companies with dispersed ownership, or without a strong controlling shareholder, has increased. This has led to an increased interest by Austrian companies in pre-bid takeover defenses, which – unlike defensive actions taken by the target board after a bid has been announced – are legal under Austrian law, provided that adopting the pre-bid defenses is compatible with directors' duties. Pre-bid defenses may include, for instance, generous change of control clauses in financing agreements, conditional sales of joint venture shares, or amendments to the company's articles, e.g., providing for higher approval thresholds for significant corporate restructurings.

6.2 Stakebuilding

In practice, acquirers rarely acquire minority shareholdings (toeholds) in target companies before launching a general control-seeking offer. Open market purchases are subject to the rules on disclosure of substantial shareholdings, which require the disclosure when an investor exceeds 4% of the company's voting rights. Subsequent disclosure thresholds are set at 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 75% and 90% of the voting rights. The lowest disclosure threshold can be set at 3% in the company's articles of association, and a number of Austrian companies have made use of this right.

Importantly, any stakebuilding through open market purchases must not be structured in a way that may be considered to constitute a public offer, or a public solicitation of offers from investors, as such public offers and solicitations are subject to the procedural rules of the Austrian Takeover Act.

6.3 Due diligence

When preparing/negotiating a friendly acquisition, it is quite common for target management to allow a due diligence review by the potential acquirer or to otherwise disclose material non-public information. Any such agreement will be subject to the conclusion of an NDA, and appropriate safeguards will have to be put in place to ensure compliance with the (EU-wide) rules on market abuse. The decision on whether or not to disclose any non-public information to the potential acquirer falls within the business judgment of the target company's board, and directors will have to exercise their discretion in accordance with their fiduciary obligations to the company.