Antitrust authorities step up scrutiny in M&A market
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Despite a reduction in the volume and value of global M&A in 2022, authorities adopted increasingly aggressive approaches to enforcement, reveals A&O’s latest Global trends in merger control enforcement report.
The report analyses data on merger control activity in 2022 from across 26 jurisdictions, focusing in particular on the EU, UK, U.S. and China.
The total number of frustrated deals sits at 32, up from 30 in both 2021 and 2020. 13 transactions were blocked while a further 19 were abandoned due to antitrust concerns.
The report finds that although global M&A is down in volume, and this resulted in a corresponding decrease in the overall number of merger control decisions, it did not translate into a reduction in intervention. Authorities have continued to step up their scrutiny of M&A - the European Commission (EC) frustrated twice as many deals in 2022 as it did in 2021, while we also saw heightened scrutiny from the Competition and Markets Authority (CMA), the Department of Justice (DOJ)/Federal Trade Commission and the State Administration for Market Regulation (in the UK, U.S. and China respectively).
“After a dip in total deals frustrated in the UK in 2021, we saw an increase in 2022 as the CMA continued to sharpen its scrutiny, resulting in four deals being blocked and three more abandoned. Notably, we also saw the first major post-Brexit merger control divergence between the CMA and the EC with the prohibition of Cargotec/Konecranes by the CMA,” commented Dominic Long, Brussels and London-based partner.
From a sector perspective, life sciences, energy and industrial/manufacturing deals saw the greatest intervention, while the U.S. and UK authorities paid close attention to private equity deals.
Elaine Johnston, New York partner and Global Antitrust Co-head, commented, “Despite a decline in merger filings in 2022, the U.S. antitrust agencies challenged more deals – ten in total, compared to seven in 2021. This is in line with the DOJ Antitrust Division head’s promise to litigate more deals and his increasing scepticism as to whether remedies can ever effectively address the agencies’ concerns. Significantly, the DOJ did not agree a single merger remedy last year. As we head into 2023, this trend looks set to continue.”
Digital and tech deals remained high on the enforcement agenda as authorities move forward with new digital rules that will give them greater powers of review. Additional obstacles for digital and tech deals are therefore anticipated in the coming years.
Procedural merger control infringements were once again the subject of aggressive enforcement by antitrust authorities, with a 7% increase in fines imposed from 2021. A total of EUR113.8 million fines were imposed in 70 decisions across the jurisdictions surveyed. China imposed the highest number of separate fines for gun-jumping (32), while the UK continued to clamp down on hold-separate violations.
“Antitrust authorities across the globe have stepped up their scrutiny of M&A, and as foreign direct investment screening by governments/regulators imposes additional obstacles for deal makers, it seems likely that we’ll see a sustained increase in intervention in the coming years. On the merger control side, at least, we can expect to see a continuation of increased collaboration between authorities as they seek to enhance their powers of intervention,” commented Sydney partner Peter McDonald.
Other notable insights
- Nearly 60% of CMA reviews in 2022 resulted in a prohibition, remedies, or the deal being abandoned. Of the deals prohibited by the CMA, 75% were completed transactions, meaning the acquirer was effectively forced to dispose of the business it acquired.
- Eleven deals were frustrated by U.S. antitrust authorities as they continue to prioritise litigation.
- Vertical transactions were scrutinised closely by authorities, a trend which we expect to continue in 2023.
- Behavioural commitments were out of favour in the EU, UK and U.S.
- Antitrust intervention in energy transactions (10%) was nearly double the proportion of global M&A in the sector (6%).
- 13 out of the 26 jurisdictions surveyed can review deals that fall below standard merger control thresholds.