Introduction
Welcome to the Eversheds Sutherland M&A Report 2024 – Navigating a complex regulatory environment to deliver successful transactions – Increased regulation and the impact on M&A.
From global supply chain disruptions to major conflicts and technological change, multiple factors have led to an unprecedented period of global geopolitical and economic instability. This continues to have a fundamental impact on how governments view M&A and therefore how M&A is regulated. Even five years ago, many jurisdictions had limited (or in some cases no) controls over inward investment, and antitrust regulation was often focused on transactions between competitors. The position today is substantially different. Antitrust regulation has been a long-standing fixture of M&A. Geopolitical and economic changes have nonetheless put even the most established authorities to the test. For example, the increased pace of innovation and prevalence of start-ups aiming to disrupt more traditional players has led to concerns of merger underenforcement and of regimes not capturing transactions considered to be anti-competitive. As a result, many antitrust authorities have reinterpreted existing antitrust rules or adopted new regulation, so that they can review previously unreportable transactions, causing a great deal of uncertainty. This comes on top of increased procedural unpredictability, as antitrust authorities extend statutory merger review timetables through methods such as extensive pre-filing discussions. Separately, a key policy imperative for many governments has become a desire to ensure control over changes in ownership, or control over key domestic businesses, assets and supply chains. This has led to a major change in the way M&A is regulated with the proliferation of Foreign Direct Investment and National Security regimes (FDI) to enable government screening of investments. We have seen a number of countries put in place entirely new FDI regimes while longstanding regimes, such as the US CFIUS regime and the French and German regimes have been substantially expanded. By way of example, in the EU, the number of EU Member States that have an FDI regime has increased from 11 in 2017 to 22 in August 2024. In the UK, in the 20 years prior to 2021 fewer than 20 transactions were reviewed on national security grounds. In 2023 alone, over 900 transactions were reviewed under new national security screening legislation. Entirely new forms of regulation are also coming on stream. In particular, the EU introduced the ‘Foreign Subsidies Regulation’ (FSR) to address perceived unfairness between non-European state-funded buyers competing with European bidders not funded by “foreign” states, adding another layer of complexity. Regulation is also being used to manage sensitivities over technology and data. This has become an important strategic imperative for governments as they strive to be at the forefront of technological developments. Some antitrust authorities have put special regimes into place. In the UK, the Digital Markets, Competition and Consumers Act (DMCC) includes a new digital markets antitrust regime aimed at large tech companies designated as having ‘strategic market status’, reinforcing and expanding the powers of the existing UK Competition and Markets Authority (CMA). The DMCC introduces new merger reporting requirements for those large tech firms. It has also been a year of significant elections across the world, including in the EU, France, the UK, India and the US Presidential election in November 2024. This brings with it the possibility of more change on the horizon.
Much of the commentary around what this all means for M&A points to a challenging and complex landscape. Market participants are having to adapt fast, in order to navigate the new reality. However, for this report, we wanted to uncover the practical realities of the new regulatory environment. To do this, we gathered comprehensive insights from over 170 lawyers across 26 countries within our global network, focusing on their experiences of M&A transactions and antitrust, FDI/national security and other regimes in their respective jurisdictions. Our global team also analyzed extensive data on the operation of those regimes over the past five years in these 26 countries across Africa, Asia Pacific, Europe, Latin America, North America, the UK, the US, and how these have impacted M&A. We drew insights from our global corporate partner team on their deal experience through our Global M&A Partners Survey, which asked key questions around the regulatory impact on M&A. We also conducted in-depth interviews with both Eversheds Sutherland partners and clients. We know that increased regulation has meant more than just uncertainty for parties involved in transactions. For many, it has also led to elongated timelines, more administration and therefore cost. The process of obtaining clearance may have become increasingly burdensome, but the conclusion we have drawn from our analysis is that almost all deals still have a positive regulatory outcome.
Our findings show that:
- Economic and geopolitical instability is affecting board assessment of M&A opportunities and investments
- Whilst regulatory developments are creating more uncertainty and extending deal timetables, for the vast majority of deals they are not impacting ultimate deal outcomes
- Most deals going through regulatory review still obtain unconditional merger clearance. The picture is similar for FDI
- There are actions parties can take to help get deals through. We’re including these within this report
As a law firm with a global footprint and which advises on more than 500 deals a year, we have seen every type of regulatory issue impacting transactions, and have navigated our clients successfully through the most complex of challenges.
“Despite the increasingly complex regulatory environment, the most important takeaway is that the vast majority of deals can still be delivered successfully with minimal impact. As long as you have the right preparation, planning, advice and support.”
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