15. May 2025
M&A Deals. Market Sentiment Has Improved Slightly – But Distressed Sales Follow Their Own Rules
Vienna. Far from soaring highs, but no longer in crisis mode either – this is how the Austrian M&A market can currently be described. A Deloitte study published at the end of April confirms a slight recovery last year, although still below the long-term average. Attorney Rainer Kaspar paints a similar picture in an interview with Die Presse. He is a partner at the law firm PHH and one of the initiators of the Vienna M&A Day, which took place for the second time on May 7.
Globally, there were many megadeals last year, while in Austria the small- and mid-cap segment at least stabilized at a low level, Kaspar says. “And the mood for this year is cautiously optimistic.” Although recession fears, budget cuts, and global risk factors are still slowing down activity, “the falling interest rates have had a positive effect.” Especially for strategic investors – mostly from abroad – this raises hopes for good buying opportunities.
Distressed M&A remains a major topic as well, and was also discussed at last week’s event. This refers to the acquisition of companies in crisis. Deals sometimes happen even at a later stage – “beyond distressed”, as Miriam Simsa, partner at Schönherr, puts it in her conversation with Die Presse. These are cases where shareholders sell a company that is already materially insolvent, or where the insolvency administrator handles the sale.
Different Scenarios
The latter is a special case compared to classic M&A deals: “In most of these cases, there are no warranties, except for the transfer of unencumbered ownership,” says Simsa. Due diligence is often only possible to a limited extent. “And the contract must be in German.” For the traditional M&A departments of international investors, this is unfamiliar territory. Simsa calls it a “clash of cultures.” This also affects the role of the involved lawyers: “They often have to act as translators as well.”
The advantage for the investor: They acquire the company free of encumbrances. The risk: “You have to take it as it is.”
The situation is somewhat different when lending banks still allow the previous owner to handle the sale. In such cases, the state of the company must be disclosed to the contractual partner. “But on the market, such transactions are often not perceived as ‘distressed’,” says Simsa. Rather, it may appear like a regular, owner-driven transaction. This also has its benefits – the company’s image remains intact. That, in turn, often leads to a better purchase price.
“Before insolvency, you can also buy with warranties,” Kaspar notes. However, those warranties are only as good as the seller’s creditworthiness. If the seller is distressed, those warranties don’t help much. “A good instrument in such cases would be W&I insurance,” Kaspar says. The abbreviation stands for Warranty & Indemnity – a way to insure warranties and other commitments.
Many Austrian SMEs may not even be familiar with this instrument. And, as Kaspar adds, “You need proper due diligence for it.”
“You need proper due diligence for W&I insurance. That’s not always possible.” Rainer Kaspar, Partner at PHH
“When the current owner sells, the deal is often not perceived as ‘distressed’.” Miriam Simsa, Partner at Schönherr