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- When minority stakes start to look like control
- Below control, but still notifiable
- Material influence and lower thresholds for scrutiny
- Enforcement risk beyond filing
- What dealmakers need to consider
Minority investments have become an increasingly common feature of dealmaking, allowing companies to build strategic relationships, access innovation and enter new markets without taking full control. This is particularly evident in sectors undergoing significant transformation, where such investments are often used to test new business models, support collaboration and accelerate growth.
But a minority stake does not necessarily equate to low risk of regulatory scrutiny. Competition authorities are paying closer attention to these structures due to concerns over influence, coordination, data governance and the potential consolidation of market power. In some cases, transactions involving non-controlling shareholdings can trigger formal filing obligations and be subject to detailed scrutiny. Even where they do not trigger formal filing obligations, there is a risk of enforcement action and potentially fines where the non-controlling shareholding is acquired in a competitor, whether in the supply of products or services or in purchasing markets, including for talent.
Understanding where and when those risks arise has become critical given the growing use of minority investment structures. While the trend predates the AI boom, recent market dynamics have accelerated it. Higher financing costs, increased sovereign investment activity and the substantial capital requirements of AI-related projects have led more investors to partner on deals, often through consortium structures involving private equity sponsors, sovereign wealth funds and strategic investors. These arrangements can help align interests, share risk and provide access to capital and expertise, but they may also create competition law concerns where investors acquire governance rights, board representation, access to commercially sensitive information or other forms of influence that go beyond a purely passive investment.
When minority stakes start to look like control
The most common trigger for scrutiny is where a minority investment comes with additional governance rights, such as board representation, veto rights, other governance mechanisms or even just access to information or other economic dependencies that give the investor the ability to influence the target’s strategic commercial decisions on the market.
In these cases, regulators may conclude that the investor has acquired de facto control, even without a majority shareholding. This would bring the transaction squarely within standard merger control rules.
However, competition scrutiny is not limited to these more obvious forms of control.
Below control, but still notifiable
In a growing number of jurisdictions, minority stakes can trigger merger control filings even where no de facto control is acquired.
In these regimes, simply crossing certain shareholding thresholds can be enough. For example:
- 25% in Austria, Germany and Israel
- 20% in Brazil, Japan and South Korea — or, in Brazil only, as low as 5% where there are horizontal or vertical overlaps
- 33.3% (one-third) of voting shares or capital in Taiwan
For companies, this is often the first major surprise, particularly where a transaction is structured as a purely financial or strategic minority investment.
The United States takes a different approach. There is no specific percentage threshold below which acquisitions of voting securities are automatically considered non-reportable. Even relatively small minority investments can raise merger control concerns, and investors should not assume that any particular level of ownership is exempt from scrutiny.
Material influence and lower thresholds for scrutiny
Some authorities capture transactions that fall short of control through more flexible tests.
The UK’s “material influence” test is a good example. It enables the Competition and Markets Authority (CMA) to review acquisitions where a minority shareholding enables the investor to influence the target’s commercial policy, even where that influence is relatively limited. In practice, this can apply to shareholdings below 15%.
The CMA has reviewed partnerships between large tech companies and AI startups, including a sub-1% stake with no special rights, and a minority position without voting rights or exclusivity. In both cases, the CMA concluded there was no material influence. However, the fact that these transactions were reviewed at all is telling. It signals that authorities are actively monitoring minority investments in strategically important sectors and are prepared to assess them on a case-by-case basis.
Similar concepts can be seen elsewhere in Europe. In Germany, for example, a shareholding below 25% may still be reviewed if it confers a “competitively significant influence”. In the air transport sector, a transaction was reviewed involving a 10% stake, combined with board representation and commercial links.
Enforcement risk beyond filing
Importantly, the risk is not limited to merger control thresholds.
Even where no filing is required, minority stakes can still create competition law risk, particularly where the investor and the target are competitors. Competition concerns may arise even where the investment is entirely non-controlling and does not confer any special governance rights.
A recent investigation by the European Commission in the food delivery sector focused on the role of a minority stake in a competitor. The issue was not the interest itself, but how it was used to:
- access commercially sensitive information
- influence decision-making
- align business strategies between competitors, including in respect of hiring each other’s employees
This marked the first case in which the Commission imposed fines for the anti-competitive use of a minority shareholding. Other investigations are ongoing and so it is unlikely to be the last.
In the United States, Section 8 of the Clayton Act prohibits certain interlocking directorates, meaning a person generally may not simultaneously serve as a director or officer of two competing corporations if the companies meet specified size thresholds and are competitors such that an agreement between them would violate the U.S. antitrust laws. While Section 8 contains several statutory exceptions, including de minimis exceptions based on the amount of competitive sales between the firms, it still warrants attention from a compliance perspective.
What dealmakers need to consider
Against this backdrop, companies need a structured and proactive approach to minority investments:
- Assess merger filing requirements early and across jurisdictions. Even small stakes can trigger notification requirements depending on local rules.
- Look beyond shareholding percentages. Authorities will consider governance rights, board representation (including whether cross-directorships between competitors are created), and commercial relationships.
- Balance commercial objectives with regulatory implications. Be prepared to consider slightly reduced governance rights, if commercially acceptable, if they would otherwise entail lengthy and costly regulatory delays.
- Evaluate the competitive relationship between the parties. Investments in competitors, or within the same supply chain, carry heightened risk.
- Consider the need and/or wisdom of putting guardrails in place. Particularly to allay any concerns over access to sensitive information as between players in the same industry.
- Plan ahead. Future increases in shareholding, through share conversions or incremental acquisitions, may trigger additional merger filings, and may expose earlier transactions that were not notified.