M&A Deals Reported to the European Commission Hit New High, Deal Rejection and Amendments Rise
European Commission
Competition lawyers saw a record number of M&A deals reported for review to the European Commission (EC) last year and the pace looks set to continue. The number of deals rejected or amended after EC scrutiny also jumped sharply.
Latest figures released by media and information group Thomson Reuters show that the EC was notified of 414 deals for general review in 2018, compared with 380 in 2017. This figure is a record high and has not been above 400 since 2007.
DLA Piper head of competition Sam Szlezinger said: "This work soaks up a huge amount of manpower and it's been stretching us to further our capabilities. As a result, we've been expanding both here in London and in Brussels."
The number of deals being rejected or amended has also risen after reaching phase one or two of scrutiny – phase one being the first stage for more high-profile deals, and phase two being the top level of scrutiny where the deal is reviewed thoroughly by a large group of EC lawyers.
Between 2004 and 2009, 42 percent of M&A deals in phase two were rejected or amended by the EC. This rose to 54 percent between 2009 and 2013, and to 63 percent between 2013 and 2018. In 2018, 12 deals were submitted for phase two scrutiny, compared with seven the previous year.
This shows the competition body increasingly cracking down on transactions amid political concern over the impact of market power.
Karen Williams, head of practical law competition at Thomson Reuters, said in a statement: “The flood of major M&A deals across the EU has driven the European Commission’s interventionist approach. It remains concerned over the changing dynamics of the tech market but that does not mean it is ignoring concentration in more traditional industries.”
Szlezinger added: “There are a lot of technology mergers around and some high-profile deals. The commission has had to review mergers while also looking at the abuse of dominance."
Recent cases investigated by the EC include: a new joint venture of two major global steel suppliers – Thyssenkrupp and Tata Steel (legal advice by Slaughter and May and Linklaters); the merger of two European rail operation companies – Siemens and Alstom (legal advice by Latham & Watkins and Cleary Gottlieb Steen & Hamilton); and the purchase of the European assets of US telecoms business Liberty Global by telecoms company Vodafone (legal advice by Linklaters and Allen & Overy).
According to Chambers rankings, Freshfields Bruckhaus Deringer, Linklaters, and Slaughter and May are the top three firms for competition law in London.
Figures from the U.K.'s Competition and Markets Authority (CMA) report show that the CMA reviewed 62 transactions in the year to last April. This figure is relatively low: in 2005/06 the figure was 210, and 100 in the period 2012/13.
Phase two reviews for the CMA however have risen to 11 between April 2018 and March 2019, compared with six in the 2017/18 period, and eight in the 2016/17 period.
DLA Piper's Szlezinger said this shows that more and more deals are falling under the category of very high profile.
He said: "One thing to think about, of course, is Brexit and how the mergers notified to the commission will be handled by the CMA after the U.K. leaves the EU.
“Handling M&A deals requires huge resources on the part of the commission and on the part of the parties involved so that’s interesting... the CMA will have a lot more work to do after Brexit."
