2016: a crucial year for merger control?
April 2016 | FEATURE | MERGERS & ACQUISITIONS
Financier Worldwide Magazine
With global M&A activity hitting epic levels in recent times, surpassing $5 trillion in total deal value for the first time ever in 2015, the need for companies to be fully conversant with the myriad complexities involved in managing merger transactions around the world has perhaps never been more pressing.
According to Allen & Overy’s ‘Global Trends in Merger Control Enforcement’ (February 2016) – which analyses merger control activity across 16 jurisdictions, with a focus on the US, EU and China – 20 deals worth over €60bn were “prohibited or abandoned” in 2015 due to antitrust intervention by authorities.
On top of this, a further 92 deals were found to have required remedies, 38 of which were achieved during an initial review period and the remaining 54 following in-depth investigations. Mergers in the telecoms and life sciences sector accounted for the highest ratio of antitrust intervention.
Clearly, the analysis provided by Allen & Overy illustrates that alongside the high-value M&A transactions seen over the last 12 months there have been significant transaction issues, a scenario that evokes little surprise given the nature of the M&A environment.
Numerous merger investigations are currently taking place, particularly across the EU, many of which are due to conclude over the coming months. Among the problematic mergers being investigated by the European Commission (EC) are: Halliburton/Baker Hughes, GE/Alstom, Mondelez/DEMB, Ball/Rexam, Fedex/TNT, Telia/Tele Danmark, Hutchison/Telefonica UK, Liberty Global/Base, Jazztel/Orange, and SNCF/Eurostar.
In the main, the issues bedevilling such transactions are complex and far-reaching; however, in the cases referenced above, investigations are predominantly focused on concerns over competitors’ incentives to compete (which may lead to higher prices), a loss of innovative offers and levels of quality.
Adding to the complexities have been a number of market and regulatory developments which have had a major affect on merger control, not only throughout Europe, but across the world. Companies, therefore, need to be fully aware of all the pertinent regulation and legislation so that they are in a position to manage the multi-jurisdictional processes they face.
Global merger control
“The nature of some of the recent M&A deals means that global merger control is increasingly under the spotlight, particularly in current market conditions where M&A activity is seeking to consolidate and create efficiencies – which necessarily means trade deals,” says Satyen Dhana, a partner at CMS. “In addition, new regulatory regimes are emerging all the time, such as those in Oman and in the Philippines. With more than 90 regimes currently in operation, companies are now faced with a proliferation of merger control enforcement regimes across the globe, each with their own unique timetables and requirements.”
One example of a more stringent regime is the introduction of the 9th Amendment of the German Competition Act in 2016, a modification that Andreas Mundt, president of the Bundeskartellamt, predicts could contain “minor adjustments in the area of the digital economy, especially to criteria for taking up merger cases involving companies with smaller turnover volumes”.
Global strategies for managing multi-jurisdictional mergers
With increasingly joined up regulatory regimes intervening more and more in M&A transactions, companies are finding it beneficial at an early stage to incorporate merger control into their global strategies for handling complex mergers. In particular, there is a need for greater consistency in messaging and document production and how this could be challenged on a jurisdiction by jurisdiction basis.
“Preparation is key,” says Mr Dhana. “Companies should identify at the outset where filings are required and instruct local counsel to assist with the interpretation of the rules. Early communication with regulators is also encouraged as it helps avoid any hidden surprises further down the process.”
In today’s highly competitive world, merger control is an important aspect in the management of complex multi-jurisdictional mergers. Around the globe, key jurisdictions such as the US, EU and China are experiencing significant shifts in how the merger control landscape embraces in-depth investigations and remedies.
“We would expect to see continued focus on the use of simplified procedures for non-problematic mergers,” notes Mr Dhana. “Regulators are also likely to continue to be willing to engage with merging businesses on possible remedies – particularly divestments – to get transactions across the line. In the EU we may see, in the coming year, implementation of reforms as set out in the Commission’s White Paper. In the US, we anticipate that the Federal Trade Commission (FTC) and US Department of Justice (DOJ) will continue their aggressive approach to merger control enforcement. As regards China, we would expect that the Ministry of Commerce (MOFCOM) will continue to enforce and follow international antitrust principles.”
A major determination in the deal planning process, as well as in the eventual outcome of a transaction, merger control is most certainly a key driver of the M&A deal dynamic.
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