For companies, bankers and corporate lawyers around Europe, there is a sudden scramble under way to recast how they pitch a series of big mergers and acquisitions to regulators. The EU is signalling that it is opening the door to bigger corporate mergers, allowing European companies to gain the scale needed to compete with Chinese and American rivals. So in response, companies and their advisers are framing their planned deals as test cases for this new approach, betting that arguments about the need for European champions, resilience and investment will help win approval.
Several potential contentious transactions in industries ranging from mining to elevators — and one including a satellite tie-up between Airbus, Thales and Leonardo — are set to provide first indications in the coming months of whether the change in language translates into a more permissive approach to consolidation. European Commission president Ursula von der Leyen has emphasised the need for European champions and cast competition policy as an important part of the bloc’s competitiveness agenda. Meanwhile, her competition chief Teresa Ribera has been explicit in saying the new approach does not amount to a blank cheque for consolidation.
“Businesses and investors need to see a body of coherent precedent showing how the framework will operate in practice, and it’s for businesses and advisers to work constructively with the commission to achieve this,” said Rafique Bachour of law firm Skadden Arps. That body of precedent does not yet exist. So, as one Brussels-based M&A-lawyer points out: “Every big case will now be packaged differently and presented as a test case to create a European champion.”
The proposed joint venture between paper manufacturers UPM and Sappi has left the commission concerned it will restrict competition. However, the companies argue the deal is the only way to stay competitive and maintain security of supply. Anglo American’s planned sale of its Brazilian nickel assets to China-backed MMG is seen as a test of Brussels’ China policy. A bid by Finnish lift maker Kone to buy rival TK Elevator will be closely watched. But the clearest test is in space: Airbus, Leonardo and Thales want to combine their satellite business in a venture to better compete with Elon Musk’s Space X. The joint venture, dubbed Project Bromo, is “the obvious test case and a no-brainer”, one lawyer said.
Source: Financial Times Companies · Summarized by HeadlinesBriefing