Merger control continues to play an important role in the regulatory landscape for M&A deals and we are seeing parties seeking to address EC competition concerns early as they balance the merger control regimes of multiple regulators. Analysing developments in merger control remedies can seem daunting, but through our reporting we have identified several key trends from EC-filed merger cases in the current period.
In 2018 only 87% of full-form filings were cleared at phase one, the lowest percentage in the five-year period. In 2020 it increased to 94%.
As the percentage of cases cleared at phase one has increased in the last year, so has the percentage of cases with remedies agreed at this stage. This increase indicates that parties are looking to offer remedies at phase one in order to avoid lengthy phase two investigations. Such an outcome can often happen in cases where there are multiple competition regulators.
One trend we are continuing to see is the number of cases coming from the manufacturing sector. Over 50% (236) of the full-form filings in the five-year period were accounted for by this sector. 60 (25%) of those cases required remedies: 48 at phase one and 12 at phase two.
However, one new trend in 2020 saw an increase in the number of cases in both the information and communications sector and the energy sector. In both these sectors the number of cases increased to 19% and 10% of all full-form filings respectively, compared to 10% and 4% in the previous five years.
We also reported on statistics for sectors with relatively large numbers of filings and the use of remedies:
The remaining 47 of the 467 full-form filings were split across 11 sectors: 11 (23%) requiring remedies; six at phase one, and five at phase two.
It is very clear that throughout this five-year period divestment has remained the most popular remedy. This trend is in line with the EC viewpoint set out in its Merger Regulation. At the same time the requirement for an upfront buyer has also increased: reaching 57% divestment remedies in 2020, compared to 23% in the previous year.
In addition to all this, we have also identified some trends in the use of non-traditional divestment remedies. In 2020 four merger cases involved behavioural remedies to both maintain existing competition, and facilitate new entries into specific areas of the market affected. These included:
The final trend we observed is the continued high number of multi-jurisdictional cases. Over the five-year period 30 (30%) cases have had remedies agreed by more than one merger control regulator: 20 were EC phase one cases, and ten were EC phase two cases.
To balance the merger control process in multiple jurisdictions, there are several important developments that parties need to be aware of. Since 1 January 2021, the CMA reviews global mergers with UK angles which would have previously been dealt with by the EC under the 'one stop shop,' and parties will need to understand the potential implications or restrictions placed on the business during a CMA investigation which were not previously been imposed by the EC. The EC has also enacted Article 22, which reduces the threshold for scrutinising M&A activity. This new guidance is particularly aimed at 'killer acquisitions' in the tech and pharmaceutical sectors. Acquisitions by government-subsidised entities are also under greater scrutiny.
While 2020 has seen no significant trends from previous years other than the potential desire of parties to address concerns early, as we emerge from the current circumstances and M&A activity starts to pick up, we can perhaps expect 2021 to be a very different year.
If you would like to understand more about our annual review or our competition and monitoring services and other advisory services, please contact Craig Reed or Katy Mattingley.
