What is the earliest time or stage in the transaction at which a notification can be made?
Merger Control (3rd edition)
As mentioned, there is no explicit provision which governs the point(s) in time for an application for clearance. As regards the earliest date practicable, Austrian jurisprudence confirmed the established practice that a concentration can be notified as soon as the (serious) intention to merge within a foreseeable period of the actors involved is recognizable. An LoI (Letter of Intent) will often be sufficient basis to notify a concentration.
According to the FNE’s Guidelines on Jurisdiction, the real and serious intention of the parties to materialize the concentration operation is sufficient in order to notify. The way this intention is expressed is not relevant, and may be reflected in a letter of intent, memorandum of understanding, unambiguous draft of the document where the operation is agreed, or public announcements of the intention to carry out the same.
In practice, a filing is seen as a one-sided review by the Authority, once a formal one-shot notification is made. The Authority may of course issue various information requests, but it will only do so after the notification is made.
It is possible to notify a transaction on the basis of a close-to-final draft version of the transaction agreement instead of a signed agreement. It is also possible to submit the notification form under the MoU, letter of intent, term sheet, etc.
In principle, the earliest time for notification is at the time when the parties have signed the merger agreement.
However, the parties are encouraged to contact the DCCA prior to submitting the notification (pre-notification). During the pre-notification phase, the DCCA may give its preliminary view on the merger and express potential concerns, thereby enabling the parties to address such concerns in advance. Pre-notification discussions may also reduce the number of questions asked by the DCCA after filing, thus increasing the likelihood of approval in Phase I.
In practice, the pre-notification phase will last at least two to three weeks in simple cases, and four weeks or more in more complex cases. Recently, we have seen cases where the pre-notification phase has lasted up to six months and where Phase I thus did not commence until the DCCA had no more questions and practically all of the case analysis had already been carried out. Consequently, in some cases the pre-notification phase essentially corresponds to a Phase I and a Phase II review.
A notification to the CCPC may be made after any of the following events occurs:
- One of the undertakings involved has publicly announced an intention to make a public bid or a public bid has been made but not yet accepted.
- In relation to a scheme of arrangement, the scheme document is posted to shareholders.
- The undertakings involved demonstrate to the CCPC a good faith intention to conclude an agreement, or a merger or acquisition is agreed. It is not necessary for a binding transaction agreement to be signed to demonstrate this, but typically the CCPC will look for at least a heads of terms or term sheet that is in agreed form as between the parties. This early notification trigger was introduced as part of the 2014 reforms of the merger control regime, and follows closely the approach taken by the European Commission under the EUMR.
The earliest point in time at which a notification can take place is when the undertakings concerned are able to evidence to the CPC their bona fide intention to conclude an agreement (such as, for example, on the basis of a term sheet), or, in the case of a takeover offer, following a public announcement of an intention or final decision to make such offer.
A notification can be filed once an agreement has been reached on the transaction’s essential terms and conditions. A letter of intent is typically sufficient to this effect, if the structure of the transaction is clearly defined.
Notably, in case of public takeover bids, merger control filing must occur
simultaneously with the regulatory filing with the securities and exchange authority (CONSOB).
The NCA has accepted filings on the basis of letter of intents in previous cases. The NCA will assess the likelihood of whether an agreement is binding. As the main rule, for the NCA to accept filing before the transaction agreement has been signed by the parties, all material aspects of the transaction must to a large extent be "final" (e.g. the scope of the acquisition).
Notification can be made at any time prior to the execution of a definitive agreement.
A notification must be made in time to ensure that the clearance decision is obtained before the first notifiable stage of a transaction. There is no statutory limitation of the earliest time. The clearance decision is valid for one year following the date of issue of the clearance decision. If the parties have not completed the transaction within one year, it is necessary to obtain another (new) approval.
Practically the possibility to notify early is limited by the requirement to submit the relevant transaction agreement, e.g. share purchase agreement, underlying the filing requirement. The document can, however, be submitted in the form of a draft that has not been finalized yet, although the draft should contain the key structural elements of the transaction.
Pursuant to Article L.430-3 of the Code, the formal notification may be made at any time once the parties can evidence a sufficiently mature project.
The parties generally proceed to the formal filing after transactional agreements (e.g. share purchase agreement) are signed but they may file the notification even before, as long as they are able to evidence that the transaction is at a sufficiently advanced stage, for instance on the basis of an executed letter of intent, term sheet or put option.
The usual practice is to notify the transaction once the relevant agreement has been signed. It is, however, possible to file on the basis of a draft transaction document, provided that the transaction structure and principal terms are reasonably clear and do not change significantly.
Parties may make their HSR filings at any time as long as they have an agreement in principle that is in writing, such as a signed term sheet or letter of intent, or if the buyer intends to make open market purchases. In a negotiated transaction each party’s notification must also include a sworn affidavit (or declaration under penalty of perjury) affirming, if applicable, that an agreement has been executed and the filing person has the good-faith intent to complete the transaction that is the subject of the notification.
In general, the notification is made after the conclusion of the purchase agreement. However, it is also possible to notify the proposed concentration at an earlier stage, e.g. at the conclusion of a letter of intent or a memorandum of understanding. In this case, the notifying parties have to credibly demonstrate that the participating undertakings are willing to conclude the purchase agreement. Either way the notification has to contain all information and documents required by the MCO.
In the case of a public takeover offer, the notification must be submitted immediately after publication of the takeover offer.
There is no limitation by law to early filings as long as the parties are seriously interested in the transaction. However, it is necessary that the notification contains all the necessary data. Therefore, filing is possible prior to the signing of a transaction as long as the parties can provide sufficient comfort that they have interest in the transaction and the data required for the notification is available.
It must be noted that in some cases the HCC has resolved that execution of a binding MoU (Memorandum of Understanding) setting out all the “essentialia negotii” or of a LoI (Letter of Intent) may constitute the triggering event for the notification deadline. These precedents indicate that irrespective of a title of a document the HCC examines whether such document creates binding obligations to the signatory parties thus constituting a triggering event for the countdown of the statutory deadline to file a merger notification.
Law No. 26876 states that the notification must be made before its closing, without indicating an earliest time or stage in the transaction. However, the transaction will not take effect if it has not been notified and approved.
Under Bill No. 2604, the operation must be notified when the contract has been concluded, the acquisition of a controlling interest has taken place, or the transaction related to the takeover bid has been made, as appropriate.
Notifications can be (voluntarily) filed from the time the notifying party(ies) is/are able to demonstrate a serious intention to conclude an agreement or, in the case of a public offer of acquisition or exchange, where the intention to make such an offer has been publicly announced, and if this agreement or the public offer at issue results in a concentration. This serious intention needs to be assessed in light of the particular circumstances of each case, but normally a letter of intent or a memorandum of understanding will be sufficient to satisfy such a requirement.
No statutory time limitation as to an early filing exists. However, a notification must be filed with a document that can prove that the parties’ actual intention to complete the transaction. Such document does not need to be a copy of the signed binding agreement, but the parties have to prove their sincere intention to complete the transaction by a document such as a statement signed by the representatives of the parties.
A notification can be filed once a trigger event has occurred. The “trigger events” are:
- Board approval for a proposed merger or amalgamation under Section 5(c) of the Competition Act; or
- the execution of any agreement or other document conveying an agreement or decision to acquire shares/voting rights/control/assets under the Sections 5(a) and (b) of the Competition Act.
Transactions may be notified even if the parties have not yet signed a sale and purchase agreement. The CMA will generally expect the parties to be able to demonstrate a good faith intention to proceed with the transaction, by reference to, for example, adequate financing, heads of agreement or similar, or evidence of board-level consideration.
In addition, it is advisable to engage in a pre-notification dialogue with the CMA, because:
- The CMA's filing form (the 'merger notice') requires very extensive information (considerably more than the equivalent filing form of the European Commission, for example). For most transactions, at least some of this information will be irrelevant or unnecessary for the CMA's review. Notifying parties can therefore use pre-notification discussions with the CMA to confirm which information can be safely omitted.
- In complex cases, such pre-notification contacts can serve to inform the CMA case team about the relevant markets and to establish the appropriate frame of reference for the CMA's review. In some cases, lengthy pre-notification discussions may reduce the likelihood of a detailed second-phase investigation.
The CMA's guidance states that, in general, pre-notification contacts should commence at least two weeks before the parties' intended date of notification. In many cases, a significantly longer period will be appropriate.
As notification results in a public announcement by the CMA (see section 26), it is not, in practice, possible to notify a confidential transaction that has not been announced. For transactions that are not yet in the public domain, the parties can consider approaching the CMA for 'informal', non-binding advice on the likelihood that a second-phase investigation would be opened. Such advice is only available if certain criteria are met.
Concentrations should typically be notified to the Commission following the conclusion of the agreement, the announcement of the public bid, or the acquisition of a controlling interest.
However, notifications may also be made earlier where the companies demonstrate a good faith intention to conclude an agreement. Typically, the Commission would accept notifications on the basis of an agreed term sheet or similar document showing advanced negotiations. A public bid is notified once an intention to make a bid has been publicly announced.
Filing can be made, at earliest, when the transaction has taken a concrete form in a merger agreement. The Israeli Antitrust Authority is normally reluctant to review mergers based on a memorandum of understanding and will only do so in exceptional circumstances based on a specific request from the parties. In these cases, according to the Guidelines, the Israeli Antitrust Authority will start the review itself, but the 30 days allotted to the Commissioner to complete the review will not start until the full merger agreement, including annexes, is presented to the Israeli Antitrust Authority. For publicly-traded companies, the Israeli Antitrust Authority will be willing to review a takeover proposal without an agreement, if an agreement does not exist.
The notification can be made immediately after the signing of the concentration agreement, such as the shares or assets purchase agreement or joint venture agreement, which requires that the preparation of the notification documents should be started earlier.
The notification can be made before the signing of the concentration agreement if the business operators can demonstrate with sufficient evidence that they are not able to provide the signed concentration agreement when making the notification due to the reasons that there are business special arrangements, compulsory requirements of other laws, regulations or policies, mandatory requirements of other jurisdictions or other reasonable reasons, or that they will not be able to abide by the relevant statutory review period if making the notification after the signing of the concentration agreement. In such a case, the notifying parties shall provide relevant materials such as the memorandum or framework agreement of the transaction and the draft concentration agreement, with the main terms and conditions of the transaction. And the notifying parties shall provide to SAMR the concentration agreement after the signing of the same without delay.
It is possible to file a concentration notice having an executed agreement (subject to conditions precedent) or a definitive draft of agreement. Also, letters of Intent, and memorandums of understanding are acceptable documents for filing the merger control notice. Nevertheless, the significant parts of the transaction cannot change once the clearance is granted.