7 January 2015
M&A Notifications up 10% in 2014 - New Act gives rise to important changes
The number of merger transactions notified to the Competition Authority rose for the second year in a row to 41 in 2014, this represents a 10% increase on the 37 notified deals in 2013. The Competition and Consumer Protection Act 2014, which entered into force on 31 October 2014, also brought with it significant changes for the mergers landscape.
Deals notified came from a cross section of sectors. The highest number of deals notified (24%) were in the travel & leisure sector, with notable deals including AerCap's acquisition of ILFC, the aircraft leasing business of AIG. This was followed by Pharma, and Healthcare (15%). Financial services came third place at 12%. Of the deals notified in 2014, 45%, were Irish deals involving an Irish target, the remainder involved foreign - including Northern Irish - businesses. In terms of deal type, in 2014 the vast majority (93%) were acquisitions of a 51-100% stake, followed by joint ventures or joint control (7%). There were no mergers in 2014.
Philip Andrews, Partner and Co-Head of McCann FitzGerald’s Competition, Regulated Markets & EU Law Group noted: "Overall activity was up for the second year running and we would expect to see this continue into 2015. The arrival of the Competition and Consumer Protection Act 2014 was one of the more noteworthy happenings for the year and brought with it among other things, the introduction of a new agency and also a change to the financial thresholds for notifiable deals."
New Act brings change
The Competition and Consumer Protection Act 2014, among other things merged the Competition Authority and the National Consumer Agency into a single body, the Competition and Consumer Protection Commission (CCPC), which now has responsibility for both consumer protection and competition enforcement (including merger control). The 2014 Act significantly decreased the financial thresholds for notifiable deals, as well as making procedural changes to the Irish merger control regime (in particular, longer review periods and a new regime for media mergers).
The introduction of the act also brought CCPC management changes, with Professor Stephen Calkins becoming CCPC member with responsibility for Advocacy and Market Intelligence and Consumer Enforcement. Gerald FitzGerald, previously head of McCann FitzGerald’s Competition law practice, replaced Mr. Calkins as the Member responsible for Mergers.
New thresholds
The 2014 Act significantly decreased the financial thresholds for notifiable deals, as well as making procedural changes to the Irish merger control regime including, longer review periods and a new regime for media mergers. This led to a notable increase in the number of notifications made towards year end. 31 deals were notified from 1 January to 30 October, with 10 deals subsequently notified in the two month period following the introduction of the new regime.
Commenting on the changes, Damian Collins, Partner and Co-Head of McCann FitzGerald’s Competition, Regulated Markets & EU Law Group said: "It’s already clear that the new thresholds will result in broad categories of Irish deals that were previously not notifiable becoming subject to notification. Transactions involving retail and licensed premises, and hotels are particularly likely to be affected."
Decision types and referrals (2003 – 2014)
During the period from 2003 – 2014, 644 transactions were notified to the Competition Authority. Over this period, out of a total of 22 Phase 2 investigations, three deals were blocked by the Competition Authority.
Of the 644 deals, seven were withdrawn following notification meaning that no decision was taken by the Competition Authority. In 2014, two of the 41 notified deals (i.e. 5% of the annual total) involved extended Phase 1 investigations. One of these investigations, Valeo/Wardell/ Robert Roberts is currently subject to an ongoing Phase 2 investigation (as of 7 January 2015).
The other, Fitzwilliam/Wittington Canada/Arnotts (the Selfridges/Arnotts deal), involved an extended Phase-1 investigation after it became the first parties-led referral back of a transaction from the European Commission to the CCPC under Article 4(4) EUMR. The deal was unconditionally cleared following an extended Phase I investigation. The CCPC relied on a large scale, third-party commissioned customer survey (of 500 Arnotts customers) to indicate that Arnotts and Brown Thomas (a subsidiary of Wittington Canada) were not close competitors.
In 2014, at least four significant Irish related transactions were notified to the European Commission under the EU Merger Regulation: Hutchinson/Telefonica Ireland, Centrica/Bord Gáis Energy, Apollo/Ulster Bank/Arnotts, and ESB/Vodafone. As the EU Merger Regulation thresholds have remained unchanged for the past 25 years, more Irish-related transactions are becoming notifiable at the EU level. McCann FitzGerald acted in all of the notifications mentioned above.
Outlook for 2015
Looking forward to 2015, Philip Andrews, believes there will be a further increase in Notifiable deals as evidenced by the year end spike in deal notifications following the introduction of lower financial reporting thresholds under the new act. This led to transactions such as the acquisitions of individual hotels and petrol forecourts now becoming notifiable deals. This trend is set to continue in 2015.
The Irish media mergers regime was also significantly amended by the 2014 Act. Further change is expected by virtue of the introduction of the Intellectual Property (Miscellaneous Provisions) Bill 2014. This bill will amend the 2014 Act to allow the Department of Communications more time to gather information in the context of a deal review. As such, it will lengthen the review timeframe for media mergers.
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