Like many private and governmental organisations, authorities have seen their capacity impacted due to the confinement of their staff. They also have had to adjust priorities and focus on policing abuses in the supply of essential products, and assuring businesses about legitimate competitor cooperation. In the EU, the Commission's workload has increased with the review of emergency subsidy schemes (see our commentary on such activities in this alert and this alert).
These developments also have inevitably had an impact on merger review. Companies that are parties to M&A transactions are assessing how these disruptions may affect their transactions. Despite these unprecedented times, competition authorities are not going to abandon their responsibilities. They are not going to take a more permissive approach to substantive merger reviews due to the crisis.
With this alert, we launch our interactive Global COVID-19 Merger Control Map, which provides real-time and up-to-date information regarding how the COVID-19 crisis has impacted merger review processes globally.
Most authorities are still adapting to the new situation. The overwhelming expectation is that the crisis will delay merger reviews—particularly for transactions with significant competitive overlaps or that demand a remedy. While the situation may soon improve in certain countries, in others—especially those countries where confinement measures are extended or reinforced—further delays and obstacles may emerge.
In addition to the introduction to our Map, we provide below certain practical tips for companies engaging in a global merger review process. This reflects our experience working with competition authorities during the first weeks of the crisis.
The current circumstances will require, more than ever, seamless cross-border collaboration and creative solutions for parties looking to close multi-jurisdictional deals. Much will of course depend upon the particular stage of the transaction that parties are in, but irrespective of this, if you are contemplating a merger review process, you will need to devise a global strategy.
Tips to Stay Ahead of the Game:
- Identify as early as practicable the jurisdictions where filings will be required. Continuously monitor developments in those jurisdictions as the situation, and the emergency measures of each competition authority, may change.
- Have a clear understanding of the contractual arrangements of your deal. Consider, in particular, any "long-stop date" (and associated termination rights), as well as the consequences of missing that date.
- Consider the need to renegotiate or seek waivers from certain contractual provisions where the COVID-19 crisis inhibits or precludes performance.
- Leverage external counsel's contacts with the authorities and proactively engage in a frank dialogue about the opportunities to prioritise the review of your filing, making the most of formal or de facto fast-tracking opportunities.
- Consider requesting derogations or exemptions from suspensory obligations. Be ready to substantiate the commercial urgency of your transaction.
- Encourage authorities to use any flexibility available to them. Support them in their required tasks to conclude the review, for example by facilitating discussions with your internal clients or third parties.
- Consider "carve-outs"—designating selected assets/companies to stay with the seller—where necessary and appropriate to enable a timelier, if only partial, closing for the transaction. Do so in close cooperation with local counsel and with a clear understanding of their effectiveness in each jurisdiction.
- Be mindful of the impact that the target's state of distress may have on the conduct of any potential merger control review. Consider for example, whether a) the "failing firm/division" defence (where the target will fail but for the transaction) may be utilised; and b) the passive acquisition of powers akin to "control" by virtue of, for example, a default on certain provisions in a credit facility may trigger a merger control filing obligation.
Note that this alert focuses on merger control approvals. You should bear in mind other regulatory regimes to which your transaction may be subject, including foreign investment screening. For an update on such regimes, please see this alert. For other COVID-19 resources, please visit our Coronavirus Resource Centre.