Whilst Covid-19 is not expected to lead to changes to the core legal and policy principles underpinning merger control regimes around the world, it is worth noting that:
- merger control regimes are still in operation, albeit filing processes and regulatory reviews may take a bit longer and some competition authorities are already starting to announce changes to their procedures that will impact merger control reviews (see our other briefing for examples). The vast proportion of these regimes impose a compulsory prenotification requirement, i.e. closing cannot take place until clearance has been granted, although in some jurisdictions it is possible to apply for a derogation from that requirement, typically where a situation of urgency applies; and
- unlike most other jurisdictions the UK regime is not mandatory or suspensory (i.e. the transaction can be completed prior to merger clearance). If the transaction is urgent, therefore, it is possible to exchange and complete simultaneously. However, the UK merger regime is still operating largely as usual and the UK Competition and Markets Authority will impose a "hold separate" order in such circumstances, and the CMA’s recommended course of action is that parties should consult with it prior to completion so that essential derogations from such an order can be agreed in advance.
Important points regarding completing prior to (or without seeking) UK clearance:
- The CMA can impose "hold separate" / initial enforcement orders (IEOs), which can:
- freeze any further integration of a completed merger which it is reviewing;
- freeze an anticipated merger; and
- even reverse any integration steps which have been taken.
- Standard IEO restrictions include the following:
- Appointing directors or other staff of the Buyer to the Board or other management positions of the Target.
- Seconding employees to the Target from the Buyer. Integrating the businesses of the Buyer and the Target, including as regards assets, employees, marketing, sales etc.
- The Buyer ensuring that there are sufficient financial and other resources available to the Target so that it can carry out its pre-merger business plan.
- The Buyer engaging in the Target’s strategic decision-making.
- The Buyer viewing competitively sensitively information of the Target.
- Once an IEO is in place, its terms must be adhered to unless the CMA has granted a derogation in relation to certain specified actions.
