M&A Due Diligence
Preparatory Task 1
From:
To:
Subject: Project Beta
At a preliminary meeting to discuss the proposed acquisition an enquiry has been raised as to
whether the transaction may come within the thresholds for notification to the competition
authorities, particularly given Rethink Limited’s existing profile in the advertising market in the UK
and the significant turnover of its parent company Benham Warstein, Inc worldwide and in Europe. It
is thought that the combination of Rethink’s advertising holdings and those of Alphacom Limited
would represent about 30% of the digital poster and billboard screens advertising market in the UK.
The legal advisors to Benham Warstein, Inc have provided reassurances that the purposed purchase
would not be subject to review under US antitrust regulations.
At our request, the client has supplied estimated turnover figures for Alphacom Limited and the
group turnover of Benham Warstein, Inc (see below).
Based on a quick review could you let me know if you think the acquisition needs to be referred to
our competition department and what this might mean for the project timetable?
Post Brexit, mergers involving UK businesses that satisfy the EU filing thresholds will still
need be notified for clearance to the European Commission (the “EC”), as they will likely be
considered to indicate an immediate, substantial and foreseeable effect under the qualified
effects doctrine.
Mergers whether of UK or foreign businesses that meet both EU and UK merger control
thresholds would face scrutiny and require clearance by both the EC and the national
competition authority in the UK (the Competition and Markets Authority ‘CMA’).
Merger control regulations may apply and can have major impact on a deal’s timetable.
When analysing whether EUMR applies, you need to ascertain whether there is a
‘concentration with a Union dimension’. An acquisition is a ‘concentration’, as it amounts to
the taking of control (Article 3).
This transaction clearly does not meet the relevant turnover criteria. It fails the Article 1(2)
test because the combined aggregate Worldwide turnover of all the undertakings
(purchaser’s group and target) is under €5000m (art 1(2)(a)).
The Article 1(3) test is also failed because, although the combined Worldwide turnover of all
the undertakings is above €2500m:
(i) Art 1(3)(b) is not satisfied in each of at least 3 Member States (combined aggregate turnover
of all undertakings to exceed €100m).
(ii) Art 1(3)(c) is not satisfied in each of at least 3 Member States (aggregate turnover of each of
the undertakings to exceed €25m).
(iii) Art 1(3)(d) is not satisfied in that the aggregate Union-wide turnover of each of the
undertakings is not over €100m (only the purchaser’s group turnover satisfies this).
Conclusion: Based on the application of the threshold tests, EUMR does not apply.
National Merger Control also needs to be considered. As Alphacom Limited is incorporated in
the UK you need to look at the relevant thresholds in the Enterprise Act 2002 (EA) to see if
there is a “relevant merger situation” (RMS). A RMS requires a transfer/acquisition of control
whereby two or more enterprises cease to be distinct; this is clearly satisfied (as Alphacom
Limited and Rethink Limited will cease to be distinct from one another after the purchase),
Preparatory Task 1
From:
To:
Subject: Project Beta
At a preliminary meeting to discuss the proposed acquisition an enquiry has been raised as to
whether the transaction may come within the thresholds for notification to the competition
authorities, particularly given Rethink Limited’s existing profile in the advertising market in the UK
and the significant turnover of its parent company Benham Warstein, Inc worldwide and in Europe. It
is thought that the combination of Rethink’s advertising holdings and those of Alphacom Limited
would represent about 30% of the digital poster and billboard screens advertising market in the UK.
The legal advisors to Benham Warstein, Inc have provided reassurances that the purposed purchase
would not be subject to review under US antitrust regulations.
At our request, the client has supplied estimated turnover figures for Alphacom Limited and the
group turnover of Benham Warstein, Inc (see below).
Based on a quick review could you let me know if you think the acquisition needs to be referred to
our competition department and what this might mean for the project timetable?
Post Brexit, mergers involving UK businesses that satisfy the EU filing thresholds will still
need be notified for clearance to the European Commission (the “EC”), as they will likely be
considered to indicate an immediate, substantial and foreseeable effect under the qualified
effects doctrine.
Mergers whether of UK or foreign businesses that meet both EU and UK merger control
thresholds would face scrutiny and require clearance by both the EC and the national
competition authority in the UK (the Competition and Markets Authority ‘CMA’).
Merger control regulations may apply and can have major impact on a deal’s timetable.
When analysing whether EUMR applies, you need to ascertain whether there is a
‘concentration with a Union dimension’. An acquisition is a ‘concentration’, as it amounts to
the taking of control (Article 3).
This transaction clearly does not meet the relevant turnover criteria. It fails the Article 1(2)
test because the combined aggregate Worldwide turnover of all the undertakings
(purchaser’s group and target) is under €5000m (art 1(2)(a)).
The Article 1(3) test is also failed because, although the combined Worldwide turnover of all
the undertakings is above €2500m:
(i) Art 1(3)(b) is not satisfied in each of at least 3 Member States (combined aggregate turnover
of all undertakings to exceed €100m).
(ii) Art 1(3)(c) is not satisfied in each of at least 3 Member States (aggregate turnover of each of
the undertakings to exceed €25m).
(iii) Art 1(3)(d) is not satisfied in that the aggregate Union-wide turnover of each of the
undertakings is not over €100m (only the purchaser’s group turnover satisfies this).
Conclusion: Based on the application of the threshold tests, EUMR does not apply.
National Merger Control also needs to be considered. As Alphacom Limited is incorporated in
the UK you need to look at the relevant thresholds in the Enterprise Act 2002 (EA) to see if
there is a “relevant merger situation” (RMS). A RMS requires a transfer/acquisition of control
whereby two or more enterprises cease to be distinct; this is clearly satisfied (as Alphacom
Limited and Rethink Limited will cease to be distinct from one another after the purchase),
