The ECA Issues FAQ Guide On Economic Concentrations

The Egyptian Competition Authority (ECA) issued a comprehensive Merger Control Frequently Asked Questions (FAQs) Booklet, consolidating inquiries received from companies and law firms regarding the new pre closing notification regime for economic concentrations. The booklet aims to enhance legal certainty and procedural transparency in the application of the Egyptian Competition Law. The FAQs offer clarifications on certain previously ambiguous aspects of the law. They are structured around the most common and pressing questions raised by stakeholders navigating Egypt's merger control regime in practice, including the scope of the ECA's jurisdiction, review timelines and procedures, and the calculation of turnover and asset value thresholds. This client brief highlights the key takeaways from the updated guidance and their implications for transaction planning and merger filing in Egypt.

Clarifications on threshold assessment

The ECA clarified that the market shares of the parties involved are not relevant in determining whether a transaction is notifiable. The authority affirmed that whenever the concerned parties meet the applicable revenue thresholds, notification is required regardless of their respective market shares in the relevant markets. Moreover, the ECA has provided guidance on how revenue and asset value should be calculated for various types of entities. The approach varies depending on the nature of the entity and the transaction structure:

• Investment funds — the FAQs clarified that the calculation of revenue for investment funds depends on multiple factors; primarily the extent of control exercised over portfolio companies. The FAQs clarify that the relevant revenue of the fund includes the revenues of all entities directly or indirectly controlled by the fund and may also take into account the role and participation of managing partners. The assessment is case-specific and depends on the existence of control relationships.
• Insurance companies — for insurance companies, the ECA specified that revenue must be calculated based on the total written premiums, including both the premiums payable and any installments due, as these reflect the company's revenue-generating activity.
• Change from of sole to joint control — the ECA clarified that in cases where an acquirer already holds joint control over the target entity and seeks to acquire sole control, the revenue and asset value shall be calculated in a manner that avoids double-counting. The relevant figures must be derived from recent audited consolidated financial statements of all parties involved in the economic concentration and their affiliated entities. However, given the pre-existing joint control, the target's revenue and asset value must be excluded from the acquirer's figures to prevent duplication. As a result, only the acquirer's own revenue and that of its affiliated entities should be included in the threshold calculation.

Determining the seller's status as a related party

The ECA clarified that the seller is not considered a related party where the seller fully exits the target or does not hold material influence over the target post closing.

Financial statement standards

The ECA primarily relies on financial statements prepared in accordance with Egyptian accounting standards. However, it permits the use of financial statements prepared under alternative standards, including IFRS or GAAP, subject to certain conditions. Parties must either (i) submit an explanatory note detailing the basis of revenue and asset value calculations for each party involved both in Egypt and globally, or (ii) provide a written declaration affirming that the thresholds of the Egyptian merger control regime are met, regardless of the accounting standard applied. In both cases, the parties assume full responsibility for the accuracy and validity of the submitted information.

Filing requirements for share swaps vs. multiple acquirers

The ECA views transactions providing for share or stock swap to involve two distinct and separate economic concentrations. Each party is simultaneously acting as both an acquirer and a target. As a result, the ECA requires the submission of two separate notification forms—one for each concentration—despite the transactions being interrelated and executed as part of a single deal. In contrast, where multiple acquirers participate in a single transaction, the ECA confirms that a single notification form may be submitted.

Document submission in regard to SPV

The ECA clarified that if the direct acquirer is a Special Purpose Vehicle (SPV), data and documents submitted must pertain to the person(s) ultimately controlling the SPV. Submitting information solely related to the SPV is not sufficient for the purposes of merger notification.

Cross border transactions

The ECA reaffirms that a notification is triggered based on the revenue or asset value thresholds, regardless of the nationality or geographic location of the parties involved. Therefore, foreign-to-foreign transactions require notification if they meet the relevant financial thresholds and the target achieves sufficient turnover in Egypt.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.