Recently, the Court of Justice of the EU upheld the multi-million dollar fine imposed by the European Commission in 2019 on a well-known multinational for having completed a takeover bid without first obtaining permission from the EU competition authorities. Under European law, closing transactions without antitrust clearance or providing misleading information during the regulatory approval process may result in fines for bidders of up to 10% of their turnover.
The Commission’s sanction in 2019 was based on the fact that the offeror infringed the rules by using a two-step transaction structure, which involved carrying out the purchase through a “provisional buyer” before obtaining authorization from Brussels. Competition Commissioner Margrethe Vestager said at the time: “Companies must respect our rules and procedures. They are obliged to notify and wait for our approval before a merger can go ahead. The offeror structured the transaction to circumvent these obligations.” Now, the High Court’s endorsement of this decision, as well as the increased penalties for failure to communicate plans to take control of a company in a phased manner, tightens the limit on this type of corporate buyouts in Europe.
Institutional Relations play a key role in cross-border M&A operations, where an open, continuous, and positive dialogue with the right interlocutor and adherence to administrative deadlines and procedures are essential to achieving a successful outcome. Faced with the need to successfully complete M&A operations, and preserve the license to operate, international investors need to build a good reputation in the country where they conduct the transaction while minimizing potential risks.
Trusted assessment from experts in communication and institutional relations, with a deep understanding of each country’s complex political environment, will allow investors to address regulatory challenges through a strategy of transparent engagement with governments, thus building relationships based on trust and ensuring the success of the transaction.
Aída Prados, Director at Estudio de Comunicación