The UK government has held on to its voluntary system of notifying mergers – leaving Britain’s private equity industry in a different position to most of the rest of the world.
The government did consider moving to a mandatory system but the overwhelming response from stakeholders was that it was best to keep the status-quo.
The industry welcomed the development, having argued private equity deals do not typically raise competition concerns and this system allows GPs to avoid the costs and delays associated with merger filings.
However, there is a quid pro quo for keeping the voluntary regime. “If the competition authorities do review a deal that has already been completed their powers to keep the merged entities separate while they carry out the review have been enhanced,” said one London-based private equity lawyer.
“If your deal doesn’t raise any issues you don’t need to notify, that concept hasn’t changed which is good news. But if your deal does raise issues, and you don’t notify the OFT [Office of Fair Trading], they have some pretty intrusive powers that will have to keep those two businesses apart if they decide to review,” he added.
One downside for GPs is the increase in merger fees – which come into effect on 6 October. These fees will be increased to a maximum of £160,000 for mergers where the target has turnover of more than £120 million, according to a client memo from SJ Berwin.
“The numbers involved in the merger fees are pretty outrageous. I think the UK’s regime will now be the most expensive in the world,” said the London-based lawyer.
“The reason for that increase is that the government wants the regime to be a full cost recovery. The problem they find themselves in with a voluntary regime is that not many mergers go through the system. What you will have is the ones going through the system subsidising the ones that don’t,” he added.
Another significant change in the proposal is the decision to merge the OFT and the Competition Commission into a single unitary body responsible for UK merger control and market investigations. Primary legislation is required and the change is not expected to take force until April 2014.