5 January 2016
M&A Notifications up 90% in 2015 according to McCann FitzGerald Review
The number of Merger and Acquisition (M&A) transactions notified to the Competition and Consumer Protection Commission (CCPC) rose to 78 in 2015, up 90% on 2014 and 110% on a three year average from 2012 to 2014. As well as an increase in domestic M&A activity, this steep rise reflects 2014 rule changes that lowered Irish reporting thresholds; 39 out of 78 deals notified in 2015 would not have met pre-2014 thresholds. Concurrently, Irish deals – transactions with an Irish target – rose to 80% of deals notified, compared to 35% pre 2015.
Additionally, despite an overall increase in filings and a buoyant M&A year internationally, foreign-to-foreign deal notifications fell year-on-year from 19 to 16. This also most likely reflects Ireland’s revised thresholds. These details are contained in an end of year Irish Merger Control review and analysis published by McCann FitzGerald today.
Philip Andrews, Partner and Co-Head of McCann FitzGerald’s Competition, Regulated Markets & EU Law Group noted: “Overall activity has risen sharply in 2015. We expect this trend to continue into 2016. It is due primarily to 2014 rule changes that lowered Irish reporting thresholds, although it may also reflect increased M&A activity. As the number of deals notified accelerates, the CCPC is taking more time to investigate mergers – another trend we’d expect to continue in the New Year. The CCPC generally aims to clear deals as quickly as possible, conscious that delay increases market risk for business.”
Irish merger reviews lengthen
The CCPC’s pace for reviewing mergers has slowed. In 2015, the CCPC took over five weeks (37 days) on average to decide either to approve a deal or to scrutinise it more intensely. This is an increase from the pre-2015 average of four weeks (27 days). Two extended ‘Phase 2’ investigations – Topaz’s acquisition of rival Esso Ireland’s business and Baxter’s bid for DCC’s medical supply business – took 26 weeks (184 days) and 19 weeks (134 days) respectively. Before 2015, extended reviews took the CCPC 16 weeks (118 days) on average. No deals were blocked by the CCPC in 2015.
Under new 2014 rules for ‘media mergers’, seven deals were notified to the CCPC and to the Minister for Communications, Energy and Natural Resources. To clear both regulatory hurdles took, on average, 13 weeks (91 days), with Ministerial approval alone taking on average six weeks (43 days). As of 31 December 2015 four of the seven notified deals were cleared unconditionally, with unconditional approval of the remaining three deals expected to issue in early 2016.
Major consolidation of Irish fuel markets cleared
In the highest profile deal of the year, the CCPC approved acquisition by Ireland’s largest fuel importer and retailer, Topaz, of its only vertically integrated competitor, Esso Ireland, after a six month review. The merged entity will be Ireland’s largest supplier of light petroleum products at terminal, wholesale, and retail levels. It will operate a network of around 425 service stations, of which around 160 will be owned and operated directly by the merged entity. CCPC approval was conditional on divestment of three Esso service stations and sale of a 50% stake in a Dublin import terminal. McCann FitzGerald acted for Topaz.
Outlook for 2016
Coming into 2016, Damian Collins, Partner and Co-Head of McCann FitzGerald’s Competition, Regulated Markets & EU Law Group, believes there will be further increase in notifiable deals.“New filing thresholds adopted in 2014 have largely achieved the policy aim: more Irish deals were notified in 2015 and fewer international ones. But some now question if revised thresholds are too low. Buying a relatively small business or property may now be subject to advance CCPC filing and approval. Two 2015 notifications concerned acquisitions of a single hotel and another concerned a single Dublin office building,” he said. Another, potentially unintended, consequence of 2014 statutory changes is that property acquisitions are considered notifiable by the CCPC if turnover thresholds are met. The CCPC is to review and consult on its interpretation of what constitutes a notifiable “asset acquisition” in early 2016.
Mr Andrews also expects that there will be more consumer surveys conducted by the CCPC as part of its review. In more complex cases, CCPC use of consumer surveys is becoming routine – a practice with substantive and procedural implications. The time required to conduct a consumer survey generally means, at a minimum, an extended “Phase 1” review is required; there were six such reviews in 2015. On substance, survey results are relied on by the CCPC in soliciting consumer views on transactions.
A number of major US deals in 2015 involved significant breakup fees to cover, among other things, merger control risk. As M&A picks up in Ireland, Philip Andrews expects similar fees to form part of Irish deals.
You may access the reports here.