Since January 2020, 43% of complex global deals could not be closed due to merger control intervention. Moreover, most (75%) of the deals that did close required some form of remedy to secure antitrust approvals.

A complex global deal is one that is subject to in-depth review in at least one of the US, EU or UK, and subject to parallel review in at least one of the remaining two jurisdictions.

With this high level of scrutiny, boards should therefore expect an increasingly challenging dealmaking environment. We have seen regulators employ an expansive and novel approach to merger control enforcement, and scrutiny can come from any direction.

Devising a well-coordinated and innovative global strategy with your antitrust counsel at the outset to secure timely approvals has therefore never been more important.

Notwithstanding the challenges, with the right antitrust strategy at the centre of the process and a sufficiently calibrated deal timetable, even very complex deals can prevail.

Merger approvals take time

Complex global deals are, on average, also taking longer to close, with parties in 2023 requiring about 18 months to secure antitrust approvals as part of in-depth multi-jurisdictional reviews. Although the first four months of 2024 show slightly shorter timelines, it remains to be seen whether this continues for the rest of 2024. In any event, we expect timelines to stay well above 12 months.

Time horizons can be further complicated by factors such as jurisdictional challenges. For example, “call in” powers to review deals which fall below applicable jurisdictional thresholds can lead to protracted deal timetables, as seen in high-profile cases such as Illumina/Grail and Qualcomm/Autotalks, both of which were subject to EU review notwithstanding that none of the applicable EU or national thresholds were met.

Illumina is currently appealing the European Commission’s decision to prohibit the deal. In the meantime, board executives will need to factor this uncertainty into their global deal strategy.

Tech sector faces the most scrutiny

When contemplating the sectors in which to invest, boards should note that unconditional clearances have been most prevalent in the telecoms and media, and retail and consumer sectors. Perhaps unsurprisingly, tech deals have proven most likely to face in-depth scrutiny and were most prone to prohibition and/or abandonment by the parties. They have also taken the longest time to close.

These stark outcomes for tech deals were perhaps driven in part by the fact that suitable remedies to address novel competition concerns raised by the deal have been more difficult to design and implement.

Rise of novel ways to challenge deals

Regulators are increasingly willing to pursue a novel and expansive approach to merger enforcement, and board executives should expect merger control intervention to feature in more deals. In particular, we have seen a rise in non-‘traditional’ antitrust concerns, with concerns involving companies at different levels of the value chain featuring in approximately a third of all complex global deals since January 2020.

In this context, there has been an increasing pursuit of novel concerns around ‘ecosystems’ (where parties have a series of complementary products or services) and loss of innovation or R&D. This reflects a macro trend of non-horizontal mergers attracting greater scrutiny over recent years, and reinforces the increasing need for boards to plan upfront for heightened scrutiny.

Regulators are also finding novel ways to challenge horizontal mergers (that is, between competitors active in the same market). These have traditionally been considered more likely to raise competition concerns than non-horizontal mergers, for example because the merger will remove an important competitive constraint in the market.

However, we have seen that more often, novel theories of harm relating to a horizontal merger’s effect on potential competition—on a forward-looking basis post-transaction—and innovation competition have played a pivotal role in the substantive analysis.

Remedies required

When a regulator has concerns about a transaction’s anti-competitive effects, the parties can offer remedies to address those concerns, for example by divesting an overlapping part of the business. If acceptable, the regulator can then make its approval conditional on those remedies.

Remedies processes are becoming increasingly thorough. A robust and persuasive global remedies strategy which factors in the differences in markets and market dynamics, as well as the attitude of different regulators, will be critical.

While the US and UK regulators have been more likely to get comfortable clearing difficult deals unconditionally, the European Commission has shown a strong preference for requiring remedies.

Scrutiny can come from any direction, adding further uncertainty and complexity. US, EU and UK regulators have all shown a willingness to prohibit transactions, and not necessarily regarding the same deal.

However, it is still possible to get regulators comfortable with large global transactions, as shown in recent cases such as Microsoft/Activision and Broadcom/VMware. Merging parties are generally encouraged to begin constructive discussions on remedies early on—as most recently codified by the CMA’s refreshed phase 2 procedural guidance.

Nafees Saeed is a partner in the antitrust practice at Weil, Gotshal & Manges LLP.