At the EU level, Commission staff have adapted to working from home but are aware of the challenges in dealing with tight timeframes presented by merger notifications (including securing meaningful input from industry participants which may be affected by a transaction). The Commission has therefore issued an appeal to request parties to delay merger filings as much as possible. Other authorities have indicated that review timeframes may be extended.
Some practical points to note would include:
- Parties in transaction discussions should take likely timetable delays and postponements into account when negotiating terms, including longstop dates and break fees. If the longstop date won’t accommodate the delay, the perhaps a waiver/extension would work (without risking re-opening the terms of the deal);
- A merger which is notifiable to the European Commission cannot be implemented until it has been notified and cleared by the Commission. It may be possible to seek a waiver of the suspension in certain urgent situations;
- We may see an increase in attempts to rely on the ‘failing firm defence’ in circumstances where a consolidating merger would otherwise be challenged. There is a three part test: the target will shortly be forced out of the market through financial distress; there is no other less anti-competitive alternative to the proposed merger; and that absent the merger the assets will inevitably exit the market. The bar is a high one and would likely involve a full Phase II review;
- Some Member States have adjusted their rules to empower the blocking of takeover of domestic companies which may have become enfeebled by the economic consequences of the pandemic. This should be checked as part of merger due diligence
- Guidelines have been issued by the European Commission on 26th March 2020 in response to concerns expressed by member states that parts of their industries, especially critical health infrastructure, were becoming vulnerable to predatory takeovers. The stated purpose of the Guidelines is to support member states to “protect critical European companies” from takeovers or influence that could “undermine security and public order,” and to preserve economic sovereignty, Commission President Von der Leyen said. The Guidelines can be found here.