- More Irish Deals Notified, Fewer International Ones
Designed to catch more Irish deals and fewer foreign deals, revised 2014 filing thresholds have been largely successful. Total number of deals notified to the CCPC rose to 78 in 2015, up 90% on 2014 and 110% on a three year 2012 – 2014 average (37). This reflects the 2014 rule changes that lowered Irish reporting thresholds, as much as any increase in domestic M&A activity: 39 out of 78 deals notified in 2015 would not have met pre-2014 thresholds. At the same time, Irish deals – transactions with an Irish target – rose to 80% of deals notified, compared to 35% pre-2015. Also, notwithstanding an overall increase in filings and a buoyant M&A year internationally, foreign-to-foreign deal notifications fell year-on-year from 19 to 16 (again, most likely reflecting Ireland’s revised thresholds).
- Irish Merger Reviews Get Longer
As the number of deals notified accelerates, the CCPC’s pace for reviewing mergers is slowing. In 2015, the CCPC took over five weeks (37 days) on average to decide either to approve a deal or to scrutinize it more intensely. That’s an increase from the pre-2015 average of four weeks (27 days). Two extended “Phase 2” investigations, Topaz’s acquisition of rival Esso Ireland’s business and Baxter’s bid for DCC’s medical supply business, took 26 weeks (184 days) and 19 weeks (134 days) respectively. Pre-2015, extended reviews took the CCPC 16 weeks (118 days) on average.
- Media Mergers Get Special Attention
Seven deals were notified to the Minister for Communications as well as the CCPC under new 2014 rules for media mergers. To clear both regulatory hurdles took, on average, 13 weeks (91 days), with Ministerial approval, which is additional and consecutive to CCPC approval, alone taking on average 6 weeks (43 days). As of 31 December 2015, four of the seven notified deals (including Liberty Global’s acquisition of Ireland’s leading commercial TV channel, TV3) were cleared unconditionally; unconditional Ministerial approval of the other three (including ITV’s acquisition of UTV) is expected to issue early in 2016.
- Difficult Deals Still Get Through
No deals were blocked by the CCPC in 2015. In the highest profile deal of the year, the CCPC approved acquisition by Ireland’s largest fuel importer and retailer, Topaz, of its only vertically integrated competitor, Esso Ireland, after a six month review. The merged entity will be Ireland’s largest supplier of light petroleum products, including petrol, diesel fuel, and aviation fuel, at terminal, wholesale and retail levels. At the retail level, the merged entity will operate a network of around 425 service stations, around 160 of which will be owned and operated by the merged entity. CCPC approval was conditioned on divestment of three Esso service stations and sale of a 50% stake in a Dublin import terminal. McCann FitzGerald acted for Topaz.
- Greater Focus on Local Irish Effects
Lower filing thresholds adopted in 2014 reflected a concern that previous thresholds, which excluded acquisitions of a business with revenue of less than €40 million, allowed monopolisation of local markets. As a result of 2014 changes, acquisition of a relatively small business or property may be notifiable: two 2015 notifications concern acquisitions of a single hotel (a 36-room Dublin hotel and, separately, a 91-bedroom North Cork hotel), while another concerns a single Dublin office building. In total, in 2015, nine notifications (12%) concern Irish hotel acquisitions and seven (9%) concern commercial property acquisitions. Not surprisingly, in reviewing these deals, CCPC focus is on competitive effects at the local level immediately adjacent to the target businesses.
- Property Deals May Require Irish Merger Clearance
One unintended consequence of 2014 statutory changes (which paradoxically aimed at clarifying what asset acquisitions are covered by merger rules) is that property acquisitions, where the property generates revenues or rents, are considered by the CCPC notifiable if the new lower thresholds are met. For this reason, the CCPC has indicated it will review and consult on its interpretation of what constitutes a notifiable “asset acquisition” in early 2016.
- Greater CCPC Reliance on Consumer Surveys
In more complex cases, CCPC use of consumer surveys is becoming routine, a practice with substantive and procedural implications. The time required to conduct a consumer survey generally means, at a minimum, an extended “Phase 1” review is required: there were six such reviews in 2015 (including two that required even longer Phase 2 reviews). On substance, survey results are relied on by the CCPC in defining relevant markets and assessing competitive effects. An example: in assessing a merger of two Irish bakeries, Pat-the-Baker and Irish Pride Bakeries, the CCPC hired B&A Surveys to survey a representative sample of 1,000 adults on substitutability of different types of bread.
- More Irish Deals to go to Brussels
Two of the highest profile Irish deals of 2015, IAG’s acquisition of Aer Lingus and Topaz’s acquisition of Esso Ireland, involved parties with sufficiently large turnover to meet EU Merger Control Regulation thresholds (in the Topaz case, EU officials agreed that the Irish authorities should review the deal). The subsequent acquisition of Topaz by Canadian Alimentation Couche-Tard has also been notified to the European Commission. Until relatively recently, few Irish transactions met EU thresholds but those thresholds have remained unchanged since they were first adopted in 1989. With the upswing in Irish M&A activity and increased consolidation across sectors in Ireland and the EU, more deals with a substantial Irish connection will likely find their way to Brussels for review. McCann FitzGerald advised on both the IAG/ Aer Lingus and the Topaz/Esso transactions.
- A Return of the “Breakup Fee”
A number of major U.S. deals this year involved significant breakup fees (representing as much as 5% of overall deal value) to cover, among other things, merger control risk. In AB InBev/SABMiller, AB InBev agreed a $3 billion (€2.75 billion) breakup fee if the tie-up did not go through. In Electrolux’s ultimately failed acquisition of GE’s home-appliance business, a breakup fee of $175 million (€160 million), in a $3.3 billion (€3 billion) transaction, was part of the deal. As M&A picks up in Ireland, expect similar fees to form part of Irish deals.