When acquiring an interest in a business, including in some circumstances when co-investing by way of joint venture, it is necessary to consider whether the transaction triggers any merger control or national security/foreign investment filing requirements.
Merger control - when to file
Most filing thresholds around the world are based on some form of turnover, asset value and/or market share thresholds. However, many competition regulators have acknowledged that thresholds exclusively based on the target’s turnover (which is true for many jurisdictions) may not capture so-called ‘killer acquisitions’ (i.e. the acquisition of small start-ups or new technologies by large incumbents which do not trigger a merger filing due to low/no turnover, but which may have a negative impact on competition). This has led to a trend of many jurisdictions reviewing their notification thresholds and some, like Germany and Austria, revisiting them to include deal value thresholds.
In other jurisdictions, such as in the UK and Australia, recent proposals include requiring digital companies that have been designated with a ‘strategic market status’ or as ‘key digital platforms’ (the terminology used in UK and Australian proposals respectively – which may also encompass forms of AI if they become of strategic importance in a particular market) to make the competition regulator aware of all intended acquisitions, regardless of whether any thresholds are met.
In France, the introduction of an ‘ex post’ merger control regime, which would enable the regulator to require certain transactions that may raise competition issues to be submitted for merger control approval on its own initiative, is still under consideration.
National security and foreign direct investment filings
Many countries, such as the UK, Germany, France and the USA, have recently strengthened, or are in the process of strengthening, their national security/foreign investment regimes. A number of these regimes make specific reference to the need to obtain local clearance for transactions which involve technology relevant to critical sectors.
For example, the new UK regime includes within its scope for transactions which, amongst others, are in one or more of the artificial intelligence, military and dual-use, multi-purpose computing hardware, quantum technology, artificial intelligence, cryptographic authentication technology or advanced materials sectors.
Current at 20 November 2020
