Mergers & Acquisitions Post-Brexit
In light of Brexit, Irish businesses are assessing the implications, challenges and opportunities involved including the implications for mergers and acquisitions.
Dr Vincent Power of A&L Goodbody recently addressed a conference on Brexit organised by the School of Law at University College Cork where he outlined the potential consequences for mergers, acquisitions and joint ventures in relation to EU Merger Control Regulation. His key messages included:
- Most cross-border mergers, acquisitions and joint ventures have to be approved by competition agencies. Many deals have to be notified to, and approved by, agencies in several countries. However, since 1990, businesses around the world have benefitted from the EU Merger Control Regulation which involves a one-stop-shop system.
- Under the EU system, deals with high turnover in several EU Member States are notified just once to the European Commission instead of having to be notified in several EU Member States. Businesses almost invariably welcome this one-stop system which streamlines the process, involves no filing fees and facilitates deal planning because just one filing regime with a fixed timetable is involved. Businesses liked the regime so much that they lobbied the EU to have the system to extend to some smaller deals than had been included in the original regulation (in Regulation 4064/89) with the result that the current system (in Regulation 139/2004) covers even more deals than originally anticipated.
- Over time, a number of Irish-related deals have been notified to the European Commission instead of having to be notified in different Member States. Recent examples of Irish-related deals which were handled by the European Commission and did not have to be notified at the Member State level include: UDG/Celesio, Ryanair/Aer Lingus, Aer Lingus/IAG.
Post-Brexit, there could be two consequences:
- More M&A deals will be handled at a national level in Ireland and fewer in Brussels because so many Irish businesses reach the EU turnover thresholds because of their UK turnover. However, if the UK leaves the EU then the UK turnover will not count for the purposes of "EU" turnover under the EU Merger Control Regulation so the "one-stop-shop" system would disappear. This would mean that a significant proportion of the Irish-related deals which would now go only to the European Commission will have to be notified in more than one country. This could only be solved if the thresholds in the EU Merger Control Regulation were reduced.
- Interestingly, despite the UK leaving the EU, the European Commission could still prohibit/block UK M&A deals even post-Brexit. The European Commission may block a deal if it believes it would significantly impede effective competition in the EU even if the parties are from outside the EU. The Commission has blocked, for example, GE's proposed purchase of Honeywell - both US corporations - and the same could happen post-Brexit where the EU could block even a deal between UK companies. So Brexit does not mean total Brexit!
Vincent's key messages also featured in The Irish Times following the event.
Date Published: 15 March 2017