Thursday 19 July 2018

Firms face 'M&A headache' as Brexit pushes up cost of deals

Dr Vincent Power, head of A&L Goodbody's EU, Competition and Procurement Group
Dr Vincent Power, head of A&L Goodbody's EU, Competition and Procurement Group
Colm Kelpie

Colm Kelpie

European merger deals involving Irish companies with UK turnover could become more complicated and costly post-Brexit, an expert has warned.

Brexit poses huge potential changes to Ireland's M&A landscape, according to Dr Vincent Power, head of A&L Goodbody's EU, Competition and Procurement Group.

At present, if two Irish companies are merging, or an Irish company buys a firm in England or elsewhere in Europe, the EU-wide turnover is counted, and if that turnover reaches a particular threshold, the companies concerned can avoid notifying various member states and instead simply notify the European Commission.

Dr Power said that in a lot of deals involving Irish companies, their most likely market to have high turnover has been the UK.

Dr Power said that is currently counted towards EU-wide turnover, but if the UK turnover is counted as third-party turnover after Brexit, an Irish company could fall under the threshold for being allowed to report directly to Brussels.

"So Irish businesses will have a more complicated, complex, multi-jurisdictional regime to deal with, and they'd lose out on the one-stop shop," Dr Power said.

"The problem is that different countries have different thresholds. For example, in Ireland it tends to be turnover that we look at. Other countries look at market share. Some countries look at market share and turnover. If you're a large Irish corporate you could end up having to make several different notifications in different countries - so it is a headache for Irish business."

Dr Power also warned that the UK could well introduce new criteria in merger control other than just competition post-Brexit in an effort to protect UK interests, and the current liberal regime might not exist.

Meanwhile, A&L Goodbody has conducted its annual review of M&A transactions notified to Ireland's Competition and Consumer Protection Commission (CCPC) and found there was a 7.5pc increase in M&A deals notified compared with the previous year.

In 2017, 72 M&A deals were notified compared to 67 in 2016 and 78 deals in 2015.

The most active sectors for M&A deals were the energy, food and drink, and media, telecoms and broadcasting sectors.

Last year saw a higher number of energy deals requiring notification to the CCPC with a total of 17 transactions being notified to the CCPC. This represents the highest proportion of notified transactions in any one sector, A&L said.

That suggests that Brexit has yet to have an impact on the M&A landscape here.

"It may be that this year we see more specific defence of Brexit-type deals on the horizon," said Dr Power.

"But there's no sense that it has led to a slowdown or anything like that. It comes in waves. There's a certain consistency in the last few years, hovering around the 70 mark."

The Department of Business, Enterprise and Innovation launched a public consultation last September regarding a review of certain Irish merger control provisions, the most important of which relates to whether the current financial thresholds for mandatory notifications should be increased.

Irish Independent

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