UK competition laws to be PE's next burden

The UK government closed its consultation period earlier this month over its proposal to make all M&A deals subject to review by competition authorities.

If the UK abandons its current voluntary scheme – in which businesses are allowed to self-assess their mergers to evaluate whether they give rise to competition concerns and thus subject to government review – the impact will be particularly felt by private equity houses, according to a recent memo to clients sent by law firm SJ Berwin.

This is because a large share of private equity deals “do not raise competition concerns, and a voluntary system allows them to avoid the significant cost and delay associated with making a filing in cases where there is self-evidently no reason to do so”, the memo said.  

Moreover private equity firms would lose an advantage over trade buyers when bidding for assets if forced to file a merger notification, said Norton Rose antitrust lawyer Peter Scott. “Private equity deals are often able to close without any condition precedent to merger clearance whereas trade buyers, which are more likely to raise substantive competition issues, may be reluctant to take the risk of completing without first obtaining clearance.” 

The UK government is leaning towards a mandatory regime, in line with most other EU nation competition laws, to capture problematic mergers which could escape review, according to the memo. The concern is that by allowing mergers to go ahead which might later be found to raise competition problems, it could be too late to “unscramble the eggs”. 

Michael Grenfell, a fellow antitrust law partner at Norton Rose who has been involved in the consultation process, added the government “certainly has not made up its mind on this”. The weight of opinion from the business and legal community is strongly opposed, on the grounds that a mandatory filing requirement would impose unnecessary regulatory burdens on mergers raising no competition issues, he added. 

Should a merger filing be made mandatory it is possible the UK will provide a more simple form for deals less susceptible to competition issues, similar to the scheme set up by EU competition authorities, said Scott. However, even filling out the EU’s watered down merger form can be an onerous process, he added.

The government is expected to issue a consultation response within the next three months. 

For a definitive guide to Europe's changing regulatory landscape, click here.