UK Law and Practice Contributed by: Becket McGrath and Marc Freedman, Van Bael & Bellis
actively scans news sources for proposed or com - pleted mergers to investigate on its own initiative and has recently deployed an AI tool to assist with this. In addition, the responsible team will consider any complaints received regarding announced deals. If the CMA identifies such a transaction through this pro - cess, it will send a short questionnaire to the parties to gather key information on the transaction and to help it to establish whether it has jurisdiction to review. The CMA is empowered to investigate, and poten - tially prohibit, qualifying transactions up to the later of four months after closing or four months from material facts of the transaction having been made public. If a transaction has already closed, the acquirer will be required to hold the acquired business separate from its other operations for the duration of the investiga - tion and may even be required to unwind certain steps before the investigation is determined (see 2.2 Failure to Notify ). Prohibition of the transaction may require forced divestment of the acquired business, poten - tially at a “fire sale” price. As a result, a decision not to notify a potentially problematic case that the CMA could investigate carries significant risks – especially for the purchaser. Accordingly, where a proposed transaction meets the relevant jurisdictional thresholds – and, more impor - tantly, potentially gives rise to competition concerns that will very likely attract the CMA’s attention if unno - tified – the purchaser is typically incentivised to bring the transaction to the CMA’s attention before closing, to reduce the risk of an unexpected intervention later Over recent years, merging parties have tended to bring transactions to the CMA’s attention by send - ing a short “briefing note” (of up to five pages) to the CMA’s mergers intelligence function, rather than by submitting a formal merger notice. As a general rule, the CMA will consider a briefing note only after the parties have entered into a signed transaction agree - ment. In such a note, the merging parties explain why the transaction in question should not attract further CMA scrutiny – ie, typically because: in the process. Briefing Note
• the UK’s jurisdictional thresholds may not be met; and • in any event, the transaction does not give rise to any competition concerns in the UK. If such a briefing note is persuasive and the CMA does not decide to investigate immediately, the merging parties will obtain a response that the CMA does not (at that stage) have any further questions on the trans - action. While this is non-binding, and the CMA can nevertheless proceed with an investigation, for exam - ple, if new information comes to light or it receives a complaint, this is very rare (<1% of cases). As a result, many purchasers will decide to proceed to closing on that basis and conditions precedent are increasingly drafted on the basis that such a response is sufficient for closing, including on public transactions. For completeness, it should also be noted that – under the new UK digital markets regime introduced by the DMCCA – firms designated as having “strategic mar - ket status” (SMS) will (once designated) be required to notify the CMA of certain transactions prior to closing. This obligation applies, for instance, where an SMS firm acquires shares or voting rights in an entity with a UK connection, that acquisition results in the 15%, 25% or 50% threshold being crossed, and the con - sideration for those shares or voting rights is at least GBP25 million. 2.2 Failure to Notify As the UK merger control regime is voluntary, there are no penalties for failing to notify a merger to the CMA. However, if a transaction that has closed raises sub - stantive competition concerns and the CMA decides to investigate, it is typical for the CMA to issue interim orders preventing any action that may prejudice or impede its investigation (see 2.1 Notification ). Moreover, following a Phase II investigation, the CMA may also require termination of a completed trans - action, and thus the disposal of the acquired busi - nesses or assets (see 5.4 Negotiating Remedies With Authorities ).
701 CHAMBERS.COM
Powered by FlippingBook