Answer ... Following an amendment to the Act against Restraints of Competition (ARC) in 2017, there are now two alternative sets of thresholds. Besides the traditional turnover-based threshold, there is also an alternative threshold that takes into account the transaction value. German merger control applies if one of these sets of thresholds is triggered.
The turnover thresholds (referring to the last full business year) are triggered if:
- the combined worldwide turnover of all undertakings concerned exceeded €500 million;
- one undertaking concerned had a turnover exceeding €25 million within Germany; and
- at least one further undertaking concerned had a turnover in Germany exceeding €5 million.
The alternative thresholds (taking into account transaction value) are triggered if:
- the combined worldwide turnover of all undertakings concerned exceeds €500 million;
- one undertaking concerned had a turnover exceeding €25 million within Germany, but neither the target nor any other undertaking concerned had turnover of more than €5 within Germany;
- the transaction value exceeds €400 million; and
- the target has significant activities in Germany.
The ‘undertakings concerned’ are always the acquirer and the target. However, if another party either (solely or jointly) controls or holds an interest of at least 25% in the target, its turnover must also be taken into account. The turnover figures of each undertaking concerned must include the net turnover generated by its group (excluding intra-group turnover) in the full financial year preceding the transaction. This includes 100% of the turnover of jointly controlled companies. If necessary, adjustments should be made in order to include the turnover of acquired companies or deduct the turnover of divested companies. Geographically, turnover should be allocated to Germany if products are sold or services are provided to customers in Germany. An exception to this rule is banking or financial income, which should be allocated to Germany if it is received by the branch or division of a credit or financial institution established in Germany. There are specific rules for the calculation of the turnover of certain companies, including media companies, insurance companies and credit and financial institutions. In particular, eight times the amount of the turnover achieved by certain media companies (active in the area of newspapers, magazines, radio and television) must be taken into account.
If two or more transactions are effected between identical acquirers and sellers (including their respective affiliates) within a period of two years, they shall be treated as a single transaction if, as a result, the above thresholds are met for the first time. Further, several transactions may be regarded as a single transaction if they are interrelated.
‘Transaction value’ includes (but is not limited to) cash, securities, company shares not traded as securities, other assets (eg, real estate, tangible assets, current assets), intangible assets (eg, licences, usage rights, rights to a company name and trademark rights), liabilities assumed and consideration for non-competition. In addition, parties must take into account future and variable purchase price components (eg, earn-outs). ‘Significant activities in Germany’ are activities that do not yet account for significant turnover, but indicate a significant competitive potential. The FCO has published a guidance paper, entitled “Guidance on Transaction Value Thresholds for Mandatory Pre-merger Notification”, that provides further details on both concepts.