"Compliance work is pretty in at the moment,” says Felix Hoerlsberger, Partner at Dorda in Vienna, “especially involving the GDPR.” The regulation famously becomes applicable on May 25 of next year, but Hoerlsberger notes that in order to be compliant companies are already under pressure, as they "have to have full documentation of what processes they're performing, complete privacy impact assessments (PIAs), and potentially consult with local regulators where there are any difficulties or high-risk processing ongoing.”
The consequences of non-compliance with the regulation can be severe — up to 4% of world-wide group turnover — "so companies have to get ready now.” In particular, he points out, many banking or insurance groups have multiple different internal systems in various group entities, and they can have trouble coordinating them. As a result, he warns, “the larger entities need 3-6 months just to find out what they’re doing, before they can begin changing them. And many of these IT systems aren’t standardized — they’re customized, making it even more complicated.”
As a result, Hoerlsberger concedes, “at the end of the day, lawyers are pretty busy.” Indeed, Dorda has "set up a sub-division on data privacy, currently running with two partners and four associates. At the end we believe we are market-leading in that sector.” He has a personal connection to the subject as well: "I wrote my master’s thesis about the old data protection act 20 years ago and I have worked on hundreds of assignments since then.”
Moving beyond the GDPR, Hoerlsberger says that, although there were few few deals in Q1 of 2017, "since April M&A has been busy as hell.” He laughs when asked to explain the uptick: "I have no idea why. There is no objective reason. You can try to argue that maybe it’s related to Brexit, elections, and so on ... but none of these arguments is totally convincing.”
At the same time, he says, "insolvencies are going down pretty dramatically. The reason seems to be that interest rates remain low — particularly in Austria (the lowest in the Eurozone for companies), so even heavily-indebted companies can pay their interest. Once those interest rates go up we’ll see insolvencies go way up as well.”
The fourth subject addressed by Hoerlsberger is the continued importance of NPL portfolio transfers across the region, which he describes as "still a really big business.” According to him, “this goes in waves: last year Austrian banks tried to get rid of theirs, and we’re still seeing it in CEE, especially Croatia.” Interestingly, he says, banks are selling these asset-based NPLs without the asset, while educated bidders try to foster a deal with the owner of the asset as well, then combine both deals at closing.
Finally, when asked for an update on the legislative agenda in Austria, Hoerlsberger reports that the combination of summertime and politics have stilled activity for the time being. "We’re going to have an early election in October,” he explains, "so Parliament is now closed. The governing coalition was more of a fight than a coalition, so not much legislation went through, with the notable exception of the Austrian law implementing the GDPR going through.” He notes that the other significant legislative achievement in recent months was the amendment of the Austrian insolvency law, making it easier for individuals to file with an amended payment plan. "The interesting part is that you often see in transactions that you have warranties with shareholders, who are individuals; the economic benefit of such warranties might be lower in the future. Probably this will boost the w&i insurance business.”