Antitrust Regimes Frustrated M&A Deals Worth More Than US$74 Billion in 2016

Antitrust regimes across the globe responded to rising numbers of strategic deals resulting in industry consolidation in 2016, frustrating 31 transactions with a combined value of over EUR69 billion (US$74 billion), according to Allen & Overy’s Global Trends in Merger Control Enforcement Report.

The report analyses merger control data from 26 jurisdictions and shows that of the 31 derailed transactions, 8 were formally prohibited and 23 were abandoned after the parties learned of the authority’s antitrust concerns.

In 2015, the report analysed 16 jurisdictions and showed a total of 20 frustrated deals in the year.  Comparing only these jurisdictions in 2016 shows 26 frustrated deals, a rise of 30% year on year.

“Antitrust authorities have responded to the growing number of strategic transactions in 2016 by stepping up enforcement efforts,” says Antonio Bavasso, co-head of antitrust at Allen & Overy. The increase in the number of frustrated deals highlights the importance of merger control planning for overall execution risk.”

2016 also saw a significant increase in antitrust authority intervention in the form of remedies, with 159 deals only cleared after parties and authorities agreed on conditions designed to address antitrust concerns.

When comparing only the 16 jurisdictions from 2015, this is an overall increase of remedy cases of 14%.

The data also shows a significant increase in conditional clearances by the European Commission, with 25 deals resulting in remedies compared to 20 in 2015.  Of these in 2016, 19 were conditionally cleared after phase 1 and a further 6 after an in-depth investigation. The U.S. saw 25 cases resulting in remedies in 2016, the same as 2015.

Rare in China

Confirming that remedies continue to be relatively rare in China, only 2 were seen here last year, however they were both subject to structural remedies, a clear break from its traditional practice of favoring non-structural remedies.

The figures show that divestments remain the most common type of remedy, but there is a continued willingness of antitrust authorities to accept behavioral remedies, with a noticeable increase at phase 1, from 39% (15 cases) in 2015 to 46% (22 cases) in 2016. Considering all jurisdictions surveyed this year, 51% (29 cases) of phase 1 conditional clearances included behavioral remedies.

The data also shows a rising tide of “upfront buyer” and “fix-it-first” remedies, with the U.S. authorities, the European Commission and the UK’s CMA leading the trend.

Looking at sectors, transport, telecoms and life sciences deals continue to account for the highest ratio of antitrust intervention compared to the global deal volumes in these sectors.

Authorities also imposed record fines on companies that failed to comply with merger control rules in 2016, levying fines totaling EUR105 million.

Of this, EUR18 million relates to fines imposed for failures to file and the remaining EUR87 million relates to fines imposed on parties who notified their transaction but who did not await merger clearance before implementing it in violation of a standstill obligation (so-called “gun-jumping”).

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