UK Law and Practice Contributed by: Alex Stratakis and Marc Freedman, Van Bael & Bellis
• Turnover Test – this applies if the annual UK turnover of the target exceeded GBP100 mil - lion. • Share of Supply Test – this applies if there are at least two enterprises that supply or purchase goods or services of a particular description, and the transaction results in a combined share of supply or procurement of 25% in the UK, or a substantial part of the UK, for those goods or services of a particu - lar description – with an increment in such share of supply as a result of the transaction. Importantly, as this is not a market share test (see 2.6 Calculations of Jurisdictional Thresholds ), the CMA enjoys significant discretion in its application of this test (thus asserting jurisdiction over mergers that do not meet the Turnover Test). • Hybrid Test – introduced by the DMCCA, this additional threshold (which appears to be intended to enable the CMA to review more so-called “killer acquisitions” and vertical/ conglomerate transactions) applies where: (a) one of the enterprises ceasing to be dis - tinct supplies or acquires 33% or more of goods or services of a particular descrip - tion in the UK or a substantial part of the UK and has a UK turnover exceeding GBP350 million; and (b) the other enterprise is a UK entity, has activities in the UK, or supplies goods or services to UK persons. However, and importantly, the DMCCA also introduced a new de minimis exception, which exempts transactions from review where the UK turnover of each of the target and the acquirer(s) is below GBP10 million. Note that, in certain sector-specific merger situa - tions (such as those involving two or more water and sewage companies) and certain public inter -
est mergers, alternative jurisdictional thresholds apply (see, for example, 1.2 Legislation Relating to Particular Sectors ). 2.6 Calculations of Jurisdictional Thresholds Calculation of the Turnover Test For the purposes of calculating the turnover threshold, the term “turnover” refers to revenue achieved by the target and derived from the sale of products and/or the provision of services in the ordinary course of business in the UK in the last completed business year for which accounts are available (see 2.5 Jurisdictional Thresholds ). • Revenues are calculated on the basis of net turnover (ie, after the deduction of sales rebates, value added tax and any other taxes directly related to the relevant turnover). • The CMA may adjust the turnover value if it is appropriate to do so (eg, where an acquisi - tion or divestment following the end of the financial year materially impacts the turnover value). Note that the CMA’s merger guidance provides additional details on applying the Turnover Test to different contexts such as joint ventures, and outlines the specific provisions that apply to enterprises in financially regulated markets, such as credit institutions, financial institutions and insurance businesses. Calculation of the Share of Supply Test In determining share of supply, the CMA will examine three key elements and, in doing so, will exercise broad discretion. • Product – the CMA will give a description of the goods or services supplied or procured by the parties. This is distinct from a market share test, but the CMA will have regard to
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