EU simplifies merger regime

The European Commission is dialing back the reporting requirements under its merger review process, and allowing more deals to be screened under a short-form simplified procedure that requires less time and paperwork to complete. 

Stakeholders have until 19 June to submit feedback on the proposals, which market sources say are receiving wide support in the industry and may become law sometime this summer. The Commission says the reforms will ease regulatory burdens on businesses operating in a less than vibrant EU economy. 

Firm are able to use a shorter notification form 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.

The thresholds are currently set at 15 percent of market share for mergers of companies in the same industry (horizontal relationships) and 25 percent for vertical mergers (when a firm acquires different parts of the supply chain). The Commission is proposing to increase both thresholds by 5 percent.

In a statement the Commission said the revisions “could result in savings for the merging companies concerned, cutting lawyers' fees by up to one half and reducing preparatory in-house work”.

Roughly 70 percent of all notified mergers qualify for review under the EU's simplified procedure, a mark the Commission hopes to raise to 80 percent.

In the past private equity firms were not always able to take advantage of the simplified procedure and its short Form CO as they were required to include all their existing portfolio companies into the threshold calculation, O’Melveny and Myers competition lawyer, Philippe Noguès, told PE Manager. 

However the Commission’s proposal says that the vertical and horizontal relationships between the entities acquiring joint control will no longer be taken into account for the purpose of determining whether the transaction can qualify for the simplified procedure.

“This is a huge improvement for private equity firms who will be able to benefit from far less work when preparing notifications and also means they will be able to benefit from the simplified procedure in much more cases,” said Noguès. 

The proposals also reduce the amount of information gathering firms must complete before submitting a merger for review. GPs will no longer have to supply copies of all analyses, reports, studies, surveys, and other documents in order for EU competition regulators to assess a transaction. 

“Firms will be spending a lot less time gathering data internally and less time, and money, with their attorneys,” said Noguès.