FW: Reflecting on the last 12-18 months, what do you consider to be the key trends shaping merger control? How have perceived national security threats impacted this space?
Navarro: National competition authorities (NCAs) have shown an increased willingness to challenge transactions and consider non-traditional theories of harm, including the impact of deals on innovation. Other areas of focus include labour market effects, such as incentives to recruit, and the concept of dynamic competition, including assessing acquisitions of nascent players in adjacent markets. One trend for deals subject to parallel reviews has been a lack of consistency in the degree of scrutiny, the issues raised, remedies considered and the outcomes reached. High-profile deals have highlighted a potential divergence in approach by the European Union (EU) and the UK post-Brexit, and abandoned deals have cited the ongoing scrutiny in multiple jurisdictions with no clear path to clearance. The introduction of targeted competition regimes for digital markets, including mandatory notifications of all deals involving the larger players – from March 2024 in the EU and January 2025 in the UK – will also drive increased activity.
Grogan: From a national security perspective, we have seen jurisdictions continue to develop their foreign direct investment (FDI) frameworks and to exercise those powers to address concerns around national security. New legislation has been introduced, in Ireland for example, to plug perceived gaps, and the UK’s Investment Security Unit (ISU) has been proactive in engaging with advisers and other stakeholders to test the effectiveness of the regime. Looking at the UK, the number of transactions notified under the National Security and Investment Act (NSIA) has remained consistently high, with on average 712 mandatory notifications in each of the last two years. However, the number of deals subject to a detailed review, or resulting in a final order, is relatively low. That said, the ISU has intervened to prohibit transactions and to impose behavioural conditions where it has identified national security concerns.
Bedford: One of the biggest changes of the last 18 months has been the introduction of the Foreign Subsidies Regulation (FSR). Transactions with a large EU dimension must make mandatory suspensory notifications disclosing details of subsidies received from third countries – and monitoring a much broader set of financial contributions to inform those disclosures. For parties that engage in big ticket M&A, this has added another regulatory hurdle that can impact deal timings and increased the data burden to be able to test jurisdictional thresholds and complete notifications in a timely manner. The FSR has particularly impacted private equity (PE), given the complex structures, multiple data points and possible involvement of state-related investors. PE has also been affected by evolutions in merger control rules too, such as the new Hart-Scott-Rodino (HSR) rules which expand requirements for disclosing minority shareholders, investment funds, and entities holding indirect stakes in an acquirer or target.
Rixen: Merger control has a significant impact on transactions, in particular regarding costs, timing and deal security. To assist with deal certainty, most merger control regimes have clear definitions of the type of transactions that fall in scope and the jurisdictional turnover thresholds that trigger filings. That has created a perceived enforcement gap for acquisitions of low turnover but high innovation value targets – colloquially called ‘killer acquisitions’ – or for other novel investment models such as ‘acquihires’, which are increasingly common in the digital sector. In the EU, this has played out through the increasing use of article 22 referral powers, leading to at least two transactions being abandoned. Some certainty has been returned by the European Court of Justice (ECJ) decision on 3 September 2024 regarding Illumina/Grail which confirmed that member states cannot refer a transaction to the European Commission (EC) where they have no jurisdiction to review it under their national rules.
Roxburgh: In the UK M&A mid-market, we see a continued trend toward both an increasing globalisation of the operations of companies being sold, and interest from overseas acquirers in UK-headquartered businesses. Merger controls, including the ever-increasing national security focused regulatory controls, have become an increasing factor in M&A across the size brackets. This is no longer something just relevant to large-cap M&A. In the UK, there has been much discussion around the type of remedies that the Competition and Markets Authority (CMA) will entertain. Traditionally, antitrust authorities have favoured structural remedies, but as markets evolve, so too have the calls for behavioural and more innovative remedies grown. This has caused some divergence for multinational deals subject to parallel reviews, with the differing approaches of the EU and UK to Microsoft/Activision exemplifying that. However, with its decision to clear Vodafone/Three, the CMA has signalled an intent to properly engage with non-structural remedies.
