The Competition and Consumer Protection Commission (“CCPC”) has published its annual Mergers & Acquisitions Report for 2021 (the “Report”), providing details and statistics regarding the mergers and acquisitions examined by the CCPC in 2021.
- Notwithstanding a second year of economic disruption caused by the COVID pandemic, the CCPC experienced a 98% increase in merger notifications as compared with 2020. Financial and Insurance Services attracted the most prominent number of merger notifications (12 in total, or 12%), with the CCPC noting a significant number of merger notifications in the banking sector in particular.
- The CCPC’s Simplified Merger Notification Procedure (“SMNP”) introduced in July 2020 is now well established. Of the 74 determinations issued by the CCPC in 2021, 32 mergers (43%) were cleared using this process, with an average clearance timeframe of just 12.9 working days during the CCPC’s Phase 1 review, as against the statutory timeframe of 30 working days.
- The CCPC’s track record on remedies is unusual internationally – along with having a relatively lower intervention rate as compared with the European Commission, the CCPC is more willing to accept ‘behavioural’ remedies (eg, ring-fencing obligations, access remedies) in both horizontal and vertical mergers than requiring divestment remedies.
- Looking ahead into 2022, the CCPC anticipates potential changes to the merger procedure following the Competition (Amendment) Bill 2022. It notes that it will consult with stakeholders on how to incorporate any changes into merger regime procedures.
The key findings of the Report are outlined as follows:
- Notifications – the CCPC received a total of 81 merger notifications, representing a 98% increase of notified mergers from 2020, notwithstanding a second year of significant economic disruption caused by the COVID pandemic. The most prominent sectors for 2021 were Financial and Insurance Services (12 notifications in total, with the CCPC noting the significant number of merger notifications in the banking sector in particular), followed by Manufacturing (nine notifications in total), Other Services (nine notifications), Real Estate (seven notifications in total) and Energy & Utilities (seven notifications in total). Information, Communications and Healthcare, which was the sector with the most notifications in 2020 (11 of 41 in total), saw a sharp drop in notifications in 2021 (just five of 98).
- The CCPC issued 74 determinations (or clearance decisions) during the year – 66 of which related to notifications made in 2021, with the remaining eight relating to notifications carried over from 2020.
- 14 investigations involved an extended Phase 1 review – three of which were carried forward from 2020. Of the three carried forward from 2020, one subject to a Phase 2 investigation (M/21/003 – Link Group/Pepper) was withdrawn, a Phase 2 determination was issued in relation to the second (M/21/005 - ESB/Coillte (JV)) and a Phase 1 determination was issued in relation to the third (M/20/029 – Brookfield (Greenergy)/Amber Oil).
- Of the remaining 11 extended investigations, Phase 1 determinations were made in respect of eight (ie,M/21/009 – CityLink / GoBus; M/21/011 – Easycash/Bank of Ireland ATMs; M/21/012 – AIB/Goodbody; M/21/016-Pandagreen/Exomex; M/21/024-Orpea/FirstCare; M-21-031 Glennon Brothers/Balcas; M/21/046 – Bank of Ireland/Davy (Wealth Mgmt and Capital Markets); and M/21/054 – Zeus Packaging/Limerick Packaging) and three required a Phase 2 investigation which are still ongoing at the end of 2021 (ie, M/21/004 – AIB/BoI/PTSB – Synch Payments JV; M/20/021 – Bank of Ireland/Certain Assets of KBC and M/20/040 – AIB/Certain Assets of Ulster Bank).
- Formal commitments - these were obtained to secure clearance in relation to three mergers in 2021:
- M/20/005-ESB/Coillte (JV) involving behavioural commitments to prevent directors appointed to the proposed JV potentially having access to and exchanging competitively sensitive information;
- M/21/016-Pandagreen/Exomex involving structural commitments to divest to ‘Thorntons Recycling’ the customers to whom Pandagreen supplies individual C&I waste collection services in certain areas of Co Louth. This divestment approved by the CCPC raises some notable issues as we flagged in our article of October 2021 (see here). The commitments sought by the CCPC include:
- A quasi-‘upfront buyer’ commitment whereby Pandagreen was required to enter into a non-binding Heads of Terms with the proposed purchaser, Thornton Recycling (or an alternative purchaser in certain circumstances) prior to completion of the main transaction. This is only the second time the CCPC has formally required an ‘upfront buyer’ type commitment proposal to date, following M/18/063 – Berendsen (Elis)/Kings Laundry (see our previous article here); and
- The divestment of a bundle of assets comprising customer records, waste collection bins and other ancillary assets, but seemingly no waste disposal real estate or waste disposal vehicles. Notably the assets appear to have been offered on the buy-side (as opposed to the target side, which is typical).
Notably, the commitments also constitute only the second ever divestment remedy at Phase 1 under the Competition Act 2002 (as amended).
- M/21/024-Orpea/FirstCare involving a behavioural commitment by Orpea to inform the CCPC of any acquisition of residential care or nursing home in Co Kildare for a period of two years from the date of determination and voluntarily notify the acquisition to the CCPC before it is put into effect, if directed to do so by the CCPC.
- Phase 1 clearance timeframes – the average timeframe for Phase 1 clearance (excluding extended reviews) in 2020 was 20.2 working days (as compared with the statutory 30 working day period). The timeframes varied from 11 to 29 working days. Notably, the 2021 average also marked a reduction of around three business days from the 2020 average.
- Media mergers – the CCPC reviewed and issued merger determinations in relation to five media mergers, M/21/007 Bauer/Communicorp; M/21/008 DMG Media/New Scientist; M/21/028 Bauer / Imagine Radio; M/21/052 DMG Media/Nalac; M/21/072 Bauer (Expres Net) / E2 Services. The average clearance timeframe for media mergers was of 18.8 working days within Phase 1, as against the statutory timeframe of 30 working days.
- SMNP - during 2021, the CCPC reviewed 35 merger notifications under the SMNP and issued 32 merger determinations. For the period July to December 2020, the CCPC issued 7 SMNP determinations. For the SMNP decisions during 2021 the CCPC took an average of 12.9 working days, whereas the corresponding figure for 2020 was 13.4 working days.
- International Mergers – while the exact nature or extent of the CCPC’s participation is unclear, the CCPC states that it followed the European Commission’s investigations into a number of proposed mergers including the following:
- M.10132 Blackstone/B&J/Applegreen
- M.10493 Illumina/Grail
- M.8181 Merck/Sigma-Aldrich
- M.9987 – Nvidia/Arm (Article 4 referral)
- M.10262 Meta (Formerly Facebook)/Kustomer (Article 22 referral)
- Other developments – from Wednesday 1 December 2021, the CCPC has made the following permanent changes to the merger notification procedure. The CCPC merger notification form and merger and acquisition procedures document have been updated to reflect these changes.
- All merger notifications (including all supporting documentation) are to be submitted in electronic format only to [email protected];
- The timeframe for submissions has also changed in that completed notifications should be submitted to [email protected] between the hours of 09.00 and 15:00, Monday to Friday (excluding public holidays);
- Where the merger may relate to overlapping products or services, applicants are now required under sections 4.8, 4.9 and 4.10 of the Merger Notification Form to provide the names and e-mail addresses of their top twenty largest customers, suppliers and competitors.
Overall, the Report provides a helpful overview of the CCPC’s merger activity in 2021 and seeks to anticipate a number of possible features of the CCPC’s merger review in 2022.
Other ongoing developments
The Report also notes that changes to legislation are expected in 2022, in particular with the Competition (Amendment) Bill 2021 which will also impact the CCPC’s current merger regime, with the CCPC noting that it will continue to review and consult on updating policy and procedures following the implementation of any relevant changes to legislation. See here for our most recent article on the significant changes that will be introduced under the Competition (Amendment) Bill 2021.
Merger Remedies Review 2003-2020
Finally, the Report also includes updates to the special section with statistics on the number of transactions that have been cleared subject to commitments over the period 2003 to 2021 which the CCPC included in its report in 2020. The updated statistics regarding CCPC commitments decisions are as follows:
- The Report notes that the CCPC and, formerly, The Competition Authority (“TCA”) have approved 36 mergers subject to commitments to mitigate potential competition concerns.
- In terms of the breakdown of the 36 commitments decisions by the CCPC/TCA over the period 2003-2021:
- A higher number of commitment decisions have been made in Phase 1, which accounted for 21 commitment decisions, compared to 15 for Phase 2 over the same period 2003 to 2021. The number of mergers approved with commitments have varied throughout this period, with none being made in 2011-2013 in contrast to seven commitment decisions made in 2005, five made in 2018 and three made in 2021.
- 66.7% of commitments involved behavioural remedies, ie, remedies that are designed to modify or constrain the future conduct of merging firms.
- A significantly higher number of these were made at Phase 1, with 16 decisions involving behavioural remedies, whereas just eight were made at Phase 2.
- Half of these involved ‘ring-fencing’ commitments to prevent the flow of competitively sensitive information, followed by obligations to voluntarily notify subsequent transactions (20%), access remedies (11%) and other behavioural remedies (19%).
- 25% of commitments involved structural remedies, ie, the divestment of a ‘business’ or a bundle of assets to a competitor to address the CCPC’s concerns. There have been a higher percentage of structural type commitments at Phase 2 with six commitment decisions being made at Phase 2, compared to three being made at Phase 1.
- The remaining 8.3% involved ‘mixed’ commitments involving both behavioural and structural remedies. This encompasses 2 ‘mixed’ commitment decisions being made at Phase 1, compared to just 1 at Phase 2.
- Of the 36 commitment decisions between 2003-2021, 24 commitments have expired, while 12 continue to apply. Six of these have defined expiry dates lasting up to a maximum of 5 years, and six will remain in force until certain ownership/shareholdings change or until the CCPC considers that the commitments are no longer required.