Following a record year in 2015, most big merger and acquisition (M&A) transactions now have a significant cross-border dimension. In response, multijurisdictional merger filings have proliferated in recent years in line with the growing number of merger regimes around the world. Today, more than 140 countries have adopted some version of a merger control regime, adding a layer of complexity to international M&A deals. Aside from the time and cost burden involved in gaining clearance in every country where the parties operate, companies must now be up to speed with the adoption of new merger filing regimes and their different timetables and nuances.
In any transaction, companies must conduct an analysis of which jurisdictions they will need to file in, and gain an understanding of key differences in requirements between jurisdictions in order to file with the relevant merger authorities, and avoid disrupting the deal. Here are some of the key questions that need to be addressed in the process:
Is this a merger?
Although a large majority of jurisdictions require merger filings in the case of a merger or an acquisition of control, some jurisdictions have chosen to create additional 'triggering events'. These may cover situations in which an acquirer is not seeking sole control, such as in a joint venture or the purchase of a minority stake. Sometimes this only applies to certain industries.
Meeting the thresholds?
Although there is some level of harmonisation among different countries, important discrepancies remain between merger filing regimes. Merger filing obligations may be triggered by different factors such as the size of the parties' turnover and assets, as well as market share. The market share thresholds are particularly tricky, since they require that the parties define the relevant market, a notoriously complex task.
We don't have to file, why would we?
Particular attention to the relevant competition landscape is normally warranted in jurisdictions with voluntary merger control regimes, where it is recommended to file if the transaction is likely to raise competition concerns, or else the risk is that the authorities will start investigating the transaction on their own account. This forces the parties to make certain difficult strategic decisions, which can have a significant impact on timing. For example, in Australia—which has a voluntary merger regime—the parties can decide to make a full filing, a very simplified filing or wait for a potential information request. The parties can also decide to close, even when the merger authority is reviewing a transaction, although that can be risky if the authority raises concerns.
No overlap, no filing?
The majority of merger control regimes worldwide today require that at least two of the parties to the transaction are active in the relevant jurisdiction for the regime to be triggered. There are, however, exceptions to this rule, and these countries are generally referred to as "single-trigger" jurisdictions, meaning that it is enough that only one party to the transaction be active in the relevant jurisdiction. In the EU, such exceptions can be found in Spain and Portugal, where transactions may be subject to merger control even when the investing company has no business there, provided the target meets the market share thresholds (no increment is required). Outside the EU, different regimes prevail. Ukraine was for long (and maybe still is) one of the most notorious single-trigger jurisdictions because of its very low thresholds, as a transaction required notification where either party generated €1 million in the country. The thresholds were amended in May of 2016, but remain low and can still in some cases be triggered by one party alone.
How long will this take?
Obtaining merger clearance is time-consuming and the review period is regularly protracted as parties often have to enter into pre-notification discussions with merger authorities. As a rule of thumb, it usually takes at least a month to gain clearance, and in jurisdictions with fledgling merger regimes and inexperienced authorities, it can take considerably longer than that. In Japan, for instance, the Japan Fair Trade Commission (JFTC) will send multiple extensive questionnaires during the pre-notification process, which can significantly delay the date of filing. The JFTC will carry on sending multiple detailed requests during the official 30-day review period, and if it considers that the parties have not responded quickly enough, it could take even the most straight-forward looking transaction to a phase two review, which can take at least 90 days. Similarly, in Indonesia, the official review period does not start until the Commission for the Supervision of Business Competition (KPPU) has declared the filing complete, which can take two to three months. Indonesia adds an additional layer of difficulty with a voluntary pre-merger filing and a mandatory post-merger filing (which must be submitted within 30 business days of signing) that is required even if a voluntary premerger filing was submitted.
Timings of merger reviews are hard to predict. For example, France is notorious for its 'incompleteness letters' – that is, letters declaring the filing incomplete and restarting the clock. They may come your way on the penultimate day of the merger review period, sometimes without much warning. They are a powerful tool for the authority to obtain hard- to-get information.
In sum, it takes experience and skills to navigate through the maze of merger control regimes around the world. It also requires an extensive network of offices or legal contacts around the world to ensure appropriate local assistance. Guiding a complex deal over the finish line is like making soufflé: it requires experience, skill and rigour but it's not as hard as it's puffed up to be.
Jérémie Jourdan is a Partner at global law firm White & Case. This article was produced by Jourdan, in collaboration with Sophie Sahlin, Associate, at White & Case and Mina Gregow, former associate at White & Case and now Legal Counsel at Stora Enso Group
Read the July 2016 issue of Business Review Middle East magazine