EU relaxes merger rules

The EU is reforming its takeover rules to reduce reporting costs for private equity firms and others.

The European Commission will review more merger deals under a “short-form” simplified procedure that requires less time and paperwork to complete.

Currently firms can only use the short-form process for mergers that are unlikely to raise competition concerns. Specifically, if the market share of the merged entity falls below a certain threshold, the merger is treated under the simplified procedure, allowing regulators to clear such cases without an extensive market investigation. Starting in January, those market share thresholds will rise 5 percent.

The threshold for the short form is now 20 percent of market share for mergers of companies in the same industry (horizontal relationships) and 30 percent for vertical mergers (when a firm acquires different parts of the supply chain).

Other changes will allow even more private equity deals to be screened under the quicker short-form merger review process. In the past, GPs couldn’t always take advantage of the simplified procedure because they had to roll up portfolio companies of the same industry or supply chain into the threshold calculation. But the commission will no longer require private equity firms to do this beginning in January.

The Commission said the reforms will ease regulatory burdens on businesses operating in a less than vibrant EU economy.

“It is the most comprehensive reform of our merger procedures to date and will make them much simpler,” said Joaquín Almunia, the European Commission official in charge of competition policy. “This will reduce the administrative burden and cost for business at a time when it needs it most.”

Roughly 60 percent of all notified mergers qualify for review under the EU's simplified procedure, a mark the Commission hopes to raise to 70 percent.