Check out the New Hotel Merger Regime

On 31 October 2014, the turnover thresholds for compulsory notification of mergers and acquisitions to Ireland's Competition and Consumer Protection Commission ("CCPC") changed.  The new rules have meant that there has been a significant increase in the number of notifications relating to the purchase of hotels.  What are the implications of the new regime?

Transactions must be notified to the CCPC where: (a) they amount to a merger or acquisition; and (b) certain turnover thresholds are met. 

A merger or acquisition occurs if:

(a) two or more undertakings (i.e., businesses/economic operators), previously independent of one another, merge; or

(b) one or more individuals who already control one or more undertakings, or one or more undertakings, acquire direct or indirect control of the whole or part of one or more other undertakings; or

(c) the acquisition of part of an undertaking, although not involving the acquisition of a corporate legal entity, involves the acquisition of assets that constitute a business to which a turnover can be attributed, and 'assets’ includes goodwill.

Apart from media mergers, the current thresholds mean mergers or acquisitions must be notified when in the most recent financial year:

(a) the aggregate turnover in the State of the undertakings involved is not less than €50,000,000; and

(b) the turnover in the State of each of two or more of the undertakings involved is not less than €3,000,000.

The change means that if two (or more) parties were involved in the acquisition of a hotel or hotel chain then the transaction would have to be notified to the CCPC where the combined turnover in the State of: (a) the acquirer (in its entirety); and (b) the target business (i.e., the hotel or chain to be acquired) exceeded €50m in the previous year and the turnover of the business being bought was more than €3m.

It appears that the change in the thresholds has meant that many hotel sales are now subject to the obligation to notify. Interestingly, 6 of the 10 merger notifications between 28 November 2014 and 27 January 2015 related to hotels. It is unlikely that this trend will be sustained but the proportion is significant.

Many observers could appreciate how the sale of a hotel chain (as in Dalata/Moran/Bewley's or LSF/Jury's) might be notifiable but what is interesting is that there have been notifications of the sale of individual hotels (as in Atlantic/Charleville Hotel, Dalata/Pillo, Dalata/White's Hotel and Dalata/Clayton Hotel).

Hotels operate in a wider geographical market than, say, grocery stores, pharmacies or filling stations so it would be unusual if the purchase of a single hotel would ever "substantially lessen competition". So, the CCPC and the Department of Jobs, Enterprise and Innovation might usefully study the area and see whether it would be sensible to carve out individual hotel deals in an appropriate manner so as to avoid unnecessary notifications.

For further information please contact a member of our EU, Competition & Procurement Team.

Date published: 25 February 2015