Merger activity in 2015 was at its highest level in years, and competition authorities in the U.S. and European Union continued to be very aggressive. The authorities are poised to remain active in 2016, and the agencies’ recent string of successes ensures that merging companies can expect an aggressive approach to deals with competition issues.
U.S. and European Union competition authorities continued to be very aggressive in challenging a number of high-profile deals in 2015.
In the U.S., merging parties in industries requiring both antitrust and Federal Communications Commission (FCC) approval need to give careful thought to the agencies’ concurrent jurisdiction and how their parallel review can impact deal timing and outcome.
Comcast and Time Warner Cable (TWC) abandoned their proposed $45 billion merger in April 2015 after facing opposition from the FCC and DOJ. This opposition was based in part on concerns that the merger would make the combined company a “gatekeeper” for Internet-based services.
The U.S. Federal Trade Commission (FTC) secured a significant litigation victory in challenging Sysco Corp.’s proposed acquisition of US Foods. The FTC, along with a number of state attorneys general, claimed the merger would have combined the only two broadline food-service distributors equipped to serve large national customers.
The FTC also challenged Staples’ proposed $6.3 billion acquisition of Office Depot, alleging that the deal would violate antitrust laws by significantly reducing competition in the market for “the sale and distribution of consumable office supplies to large business-to-business customers in the United States.”
In the EU, following a long and intensive investigation, the European Commission approved GE’s $9.5 billion acquisition of Alstom’s power and grid business conditioned on Alstom’s commitment to divest its heavy-duty gas turbine business.
Scandinavian telecom operators TeliaSonera and Telenor abandoned their plans to combine mobile telecom operations after the EU Commission raised competition concerns that the resulting mobile network company would face insufficient competition from the remaining operators.
In a number of other EU telecom mergers, the EU Commission obtained substantial remedies from the parties that eliminated competitive overlaps, strengthened the position of competitors, and facilitated entry into national telecom markets.
Notwithstanding the number of cases litigated in 2015, most in-depth merger reviews are being resolved through settlement, usually by means of divestiture.
This article notes that when agencies have concerns about the viability of a divestiture package, they are likely to require merging parties to identify an “upfront buyer” – a buyer with whom the merging parties have entered into a binding agreement for sale of the divestiture assets.
Over the past several years, U.S. agencies have required upfront buyers in nearly two-thirds of divestitures, and an increasing number of conditional approvals in the EU have contained an upfront buyer commitment.
