Volume of M&A deals reported likely to rise substantially as a result of new Competition Law rules

Volume of M&A deals reported likely to rise substantially as a result of new Competition Law rules (27 January 2015)

  • Steady increase in M&A activity and Private Equity M&A deals in 2014
     
  • Recent change to law will almost certainly mean more M&A notifications in 2015 with many smaller deals now having to be notified to authorities
     
  • New rules mean directors should check to see whether deals are notifiable 

2014 saw a notable increase in merger and acquisition (M&A) activity and a significant uplift in transactions undertaken by private equity players, according to the Merger Notifications Review, published by A&L Goodbody's EU, Competition & Procurement Group.

The Review confirms a 52% increase in the number of M&A deals reported to authorities between 2009 and 2014. Forty-one deals were notified to the new Competition and Consumer Protection Commission (CCPC) and Competition Authority in 2014 – an increase of 11% on the 37 deals notified in 2013 and a significant increase on the 27 deals in 2009.

The most active sectors during 2014 were Financial Services, Health & Medical, and Food & Drink.

While trade buyers continued to dominate the market, the number of private equity deals showed a significant increase in 2014, representing 34% (14 deals) of overall M&A activity in 2014 – thus demonstrating the strong appetite among private equity players to buy into Ireland’s recovering economy.

Dr. Vincent Power, Partner and Head of EU, Competition and Procurement at A&L Goodbody comments: "As forecast in our report last year, there was a steady increase in merger notifications in 2014.  We anticipate an even more substantial increase in notification activity in 2015 given the introduction of new rules in 2014. The reduction in the thresholds means that more mergers and acquisitions will have to be notified. There was a 42% increase in mergers in the last two months of 2014 over the same period in 2013. Directors must now be more careful to scrutinize deals to see if they are notifiable because the thresholds for compulsory notifications have reduced."

Dr. Power points out that executives contemplating M&A deals must now contend with more rigorous examination of their plans than would have been the case even five years ago and that there is an increasing focus on transparency.

“It is now commonplace for the EU and Irish competition authorities to ask for emails, business plans or memos from several years previous as part of the notification process. Executives contemplating M&A deals therefore have to be aware that their thoughts on their competitors or the marketplace could become open to scrutiny, and ultimately determine the success of a deal. This focus on transparency is likely to be the next major battleground for Irish merger control.”

"The CCPC has reviewed over 600 deals since 2003, blocking only three of these. This is in line with international norms."

Anna-Marie Curran, Partner in the Group, commented: "Under the new merger regime, it is the same notification form for the smallest and the largest businesses. It is the same fee of €8,000 – the EU charges nothing to even the largest M&A deals and some other jurisdictions have scale fees depending on turnover. Because the thresholds have fallen under the new regime, more deals will have to be notified.  Notifications under the new regime, since 31 October, have involved the sale of individual hotels and garages. The new regime allows a more targeted and precise review by the CCPC of what is happening on the ground in Irish M&A activity but more businesses now need to factor in the possibility of having to notify their deals."

Alan McCarthy, Partner in the Group, observed: "Merging parties will have to expect that the CCPC will likely take longer to approve mergers in 2015 even where there is no material issue given the extended time period afforded to the CCPC to assess notified mergers under the new rules. Last year's media merger control experience in Ireland provided no indicators for the likely timing impact of the new media merger rules in 2015. These new rules will require the notification of media mergers to either the European Commission or to the Competition and Consumer Protection Commission and also separately to the Minister for Communications, Energy and Natural Resources. Merging parties in media mergers will need very carefully to plan how long it may take to obtain final media merger approval given the potentially extensive time periods for their review under the new rules."

Notable deals notified in 2014 included:

  • AerCap /ILFC
  • Lone Star/Start Mortgages/Nua Mortgages
  • GE/Milestone
  • Valeo/Wardell/Robert Roberts
  • Dalata/Moran/Bewley’s

For full details on the report, please see our 2015: Review of Irish Merger Notifications in 2014.

For further information please contact a member of our EU, Competition & Procurement Team.

Date published: 27 January 2015