Answer ... Notification is voluntary.
However, the Competition and Markets Authority (CMA) has its own market intelligence functions, which may lead to mergers coming to its attention even if they are not notified to it. The CMA has the power to require the parties to a merger to provide sufficient information to allow it to review the merger itself if it chooses to investigate on its own initiative.
Answer ... There are no obligations on parties to discuss their mergers with the CMA either before making a notification or at all, unless the CMA issues an enquiry letter of its own initiative.
However, the CMA offers two possible routes by which parties can discuss a planned merger with the CMA:
- seeking informal advice; and
- pre-notification discussions.
The first of these, informal advice, is intended to allow the parties to a potential transaction that they believe may fall under the merger control regime to discuss the transaction with the CMA informally and in confidence in advance of a formal notification.
The CMA guidance on when informal advice will be given states that it is appropriate for ‘good-faith confidential transactions’, which are described as transactions that are neither purely hypothetical nor public domain. The evidence required to support a request for informal advice is likely to include proof of adequate financing, heads of agreement and/or board-level consideration of the transaction. The CMA will also require the parties to demonstrate that there is a genuine potential competition issue to be considered.
Pre-notification discussions, on the other hand, are intended to allow parties to a merger that have decided to notify the CMA to engage with the CMA in advance of doing so, typically on the contents of a draft notification. The CMA will not make these discussions, or the fact that they are taking place, public.
Answer ... As there is no obligation to file a notice, no party is responsible for doing so.
However, any merger notice must be submitted by an ‘authorised person’, which is defined as “any person carrying on an enterprise to which the notified arrangements relate”, or a representative of an authorised person (eg, a solicitor).
Any party to a transaction that it believes may fall under the merger control regime may submit a merger notice to the CMA in relation to that transaction. Alternatively, parties to such a transaction may opt to submit a joint merger notice.
As a general rule, the buyer of a business or company will usually wish to control the notification process.
Answer ... Merger fees are levied by the CMA and are payable in relation to all qualifying mergers regardless of whether the merger was notified and regardless of the outcome of the CMA’s investigation.
Fees vary from £40 to £160,000, depending on the turnover of the business being acquired. The fee is payable by the person submitting the merger notice, or by the person acquiring control if no merger notice was submitted.
Answer ... Under Section 96 of the Enterprise Act, merger notices must be “in the prescribed form” and “contain the prescribed information”.
The CMA provides a template merger notice which the CMA guidance states comprises the ‘prescribed form’ for the purposes of the act. The CMA guidance further states that if a party provides all the information relevant to the merger in question that is responsive to the questions in the template merger notice, then this will satisfy the ‘prescribed information’ requirement.
However, as the CMA guidance indicates, the precise nature and extent of the information required will vary from case to case. Accordingly, the notifying party or parties are given a degree of latitude in determining what information needs to be included in a merger notice.
Where evidence is cited in support of statements contained in a merger notice, CMA guidance indicates that that evidence (including any relevant contemporaneous documents) should be provided along with the merger notice “where reasonably practicable”. As a minimum, the supporting documents will include:
- the transactional documentation;
- the latest report and accounts of the parties;
- any business plans entered into at the time of the transaction; and
- any third-party market reports relevant to the market in which the parties compete.
Answer ... As filing is voluntary, there are no deadlines by which a notification must be filed. However, since the CMA will not start its investigation until it has all the relevant information, it is in the parties’ interests to file the transaction as soon as possible after signing.
Answer ... Parties can notify the CMA prior to final agreement and are encouraged to do so (although the merger must have been publicly announced before they can submit a merger notice). They are also encouraged to engage with the CMA prior to filing a formal merger notice.
However, the CMA can reject a notice if it suspects that the parties do not in fact intend to carry the notified arrangements into effect.
The agreement should be in sufficiently final form to represent the transaction that will be the subject of the notification.
Answer ... As there is no obligation to file a merger notice, there is no requirement to obtain clearance before proceeding with a transaction.
However, parties are advised to consider carefully whether a merger notice is appropriate, as the CMA has the power to investigate and take action in relation to a merger on its own initiative and may do so even after the merger has completed, provided that it does so within four months of completion.
In many cases the transaction will be conditional on CMA clearance, so early closing is not an option (unless the parties waive the condition). In mergers that have already closed, the CMA may choose to impose a ‘hold separate’ order which will prevent the parties taking any action which could prejudice the CMA’s ability to impose a remedy. Fines of up to 5% of global turnover can be imposed on parties infringing such an order.
Answer ... Under Section 96(2)(b) of the Enterprise Act, any merger notice must confirm that the merger proposal has been made public. This is because the CMA will issue a public invitation to comment at the start of its investigation into a merger.
The parties should make clear in their merger notice any information which is of a commercially sensitive nature. The CMA will generally excise such information from its published materials about the merger.