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No let-up in merger control focus as global antitrust authorities continue to frustrate M&A deals in 2021

Allen & Overy’s latest Global Trends in Merger Control Enforcement report reveals that antitrust authorities around the world continued to frustrate M&A deals during 2021, with 30 transactions either abandoned or prohibited. 

The report, released today, analyses data on merger control activity in 2021 from 26 jurisdictions globally.

The tally of 30 frustrated deals is in line with the figure for 2020, which is perhaps surprising given the worldwide boom in M&A activity and record numbers of merger filings being seen in a number of jurisdictions. But as the report argues, the reason is likely to be timing. M&A transactions usually undergo lengthy merger control scrutiny, leading to a data time lag on any prohibited or abandoned deals. The report suggests we watch this space for a rise in frustrated deals in 2022.

At a jurisdictional level, despite a dip from a total of nine in 2020 to six in 2021, the UK was second only to the U.S. in terms of the total number of frustrated transactions. Although the report notes that the fall in numbers does not signal a less interventionist approach by the Competition and Markets Authority (CMA). In fact, late in the year, the authority announced adverse provisional findings in two phase 2 cases. One has now been cleared subject to a large divestment package. The final decision in the other is due in the coming months.

Commenting, Brussels and London-based A&O partner Dominic Long said: “The CMA started its post-Brexit journey in 2021 as it reviewed large and complex mergers in parallel with the EC. Add the new UK national security screening regime into the mix and getting clearance for deals with a UK nexus is becoming an increasingly complicated matter.”

Meanwhile in the U.S. nine deals were abandoned in 2021 due to antitrust agency concerns. This is in line with 2020, and reflects the antitrust agencies’ continued willingness to challenge transactions. The agencies sued to block seven deals in 2021 and there have been three challenges so far in 2022.

New York A&O partner and Global Antitrust Co-Head Elaine Johnston commented: “The figures show another extremely busy year for the U.S. antitrust agencies. The DOJ challenge to the Aon/Willis Towers Watson megamerger, cleared by several other jurisdictions, showed how a single jurisdiction can halt a global deal. The DOJ has also stated that it favours blocking problematic deals over accepting remedies, so we can expect to see more litigated challenges.”

In Europe the report highlights that three deals were abandoned during 2021 due to EC antitrust concerns, up from just one in 2020. Interestingly, all were in the transport sector: two airline mergers (IAG/Air Europa and Air Canada/Transat) and a shipbuilding transaction. For the second year in a row, no deals were blocked.

From a sector perspective, antitrust intervention in 2021 targeted life sciences, energy and transport sectors but not (yet) tech, despite tech acquisitions accounting for over 23% of completed deal volumes. But the report suggests the picture may be more nuanced, especially as many of the proposals for new or enhanced merger control scrutiny in the digital sector are yet to come into effect.

Looking at procedural merger control rules, antitrust authorities kept up their vigorous enforcement in this area in 2021. The report highlights a surge in the number and level of fines imposed for procedural breaches last year, with antitrust authorities reaching over 130 individual infringement decisions, compared to 34 in 2020. Fines meanwhile topped EUR106 million. Enforcement in China also reached record levels.

The report discusses how a combination of new authority heads, proposals for strengthened rules and increasing international cooperation are leading to an expectation of tougher merger control enforcement in the future.

Sydney A&O partner Peter McDonald commented: “There is a growing trend for antitrust authorities to collaborate both on wider policy goals and individual cases. In Asia Pacific we have seen regional cooperation initiatives as well as authorities such as the Australian ACCC working with counterparts across the globe. We expect to see even more coordination in the future, particularly in relation to digital mergers, combined with more rigorous reviews across multiple regional authorities.”

Other key report findings:

  • In China, SAMR blocked its first merger, the deal between the country’s two largest video game live-streaming platforms, Huya and DouYu.
  • 2021 saw authorities frustrate a number of vertical transactions – an aggressive approach which looks set to continue into 2022.
  • Authorities coordinated on remedies as use of behavioural conditions declined.
  • Antitrust authorities around the globe are increasingly taking environmental and sustainability factors into account when assessing mergers.
  • Nearly 100 jurisdictions now have some form of foreign direct investment (FDI) law, adding further complication to deal making.