1) Is a merger control regulation in force?

Yes. The UK merger control regime is governed by the provisions of the Enterprise Act 2002 ("Enterprise Act").

2) Which authorities enforce the merger control regulation?

The Competition and Markets Authority (the "CMA") is the authority responsible for reviewing mergers in the UK. Decisions of the CMA may be appealed to the Competition Appeal Tribunal.

3) Relevant regulations and guidelines with links:

UK merger control is governed by the Enterprise Act, as amended – in particular by the Enterprise and Regulatory Reform Act 2013 and Digital Markets, Competition and Consumers Act 2024.

The CMA has published the following guidelines:

The UK’s national security screening regime is governed by the National Security and Investment Act 2021("NSIA”). The activities of the target that may trigger a mandatory notification under the NSIA are set out in The NSIA (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021.

The UK Government has published the following key pieces of guidance on the operation of the NSIA:

4) Does general competition regulation apply to mergers or ancillary restrictions?

The prohibition of agreements and concerted practices that may restrict or distort competition and the prohibition of abuse of a dominant market position contained in the Competition Act 1998 (“Competition Act”) may apply to mergers.

For mergers reviewed by the CMA, restrictions on competition that are ancillary to the merger are not subject to separate scrutiny under the Competition Act. Restrictions that go beyond what may be considered ancillary may be caught by the general prohibition on agreements and concerted practices that may restrict or distort competition in the Competition Act.

5) May an authority order a split-up of a business irrespective of a merger?

Yes. Pursuant to a market investigation under the Enterprise Act, the CMA has the power to impose structural remedies, including requiring companies to sell parts of their business to improve competition. The CMA is also able to impose structural remedies pursuant to a “pro-competition intervention” in relation to firms designated as having “strategic market status”.

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

Whilst only the CMA has the power to prohibit mergers on competition law grounds, certain other authorities may prohibit mergers or need to be notified and give their approval.

Public interest mergers

The UK Secretary of State can intervene in relevant merger situations (on which see topic 9) that raise certain public interest concerns by issuing a “public interest intervention notice”. The specified public interest considerations on which the Secretary of State can intervene in a merger case are:

1. plurality and other considerations relating to newspapers and other media;
2. the stability of the financial system; and
3. the need to maintain the capability to combat, and to mitigate the effects of, public health emergencies.

The Secretary of State may also intervene on the basis of a consideration which is not specified but which the Secretary of State believes ought to be specified.

Once they have issued a public interest intervention notice, the Secretary of State assumes responsibility for determining whether to refer the merger to a Phase 2 investigation, as well as taking the final decision on whether the merger operates against the public interest. The CMA will investigate the relevant competition issues as it ordinarily would and advise the Secretary of State as to its findings, as well as summarising any representations received by it as to the relevant public interest considerations.

The Secretary of State can also intervene in certain other mergers that fall below the general thresholds where they concern broadcasters or newspaper suppliers, in particular by issuing a “special public interest intervention notice” to intervene in respect of a “special merger situation”. Special merger situations are mergers that do not meet the ordinary merger control thresholds but involve a supplier or suppliers of at least 25% of all newspapers or broadcasting of any description in the UK or a substantial part of the UK (unlike the share of supply test, there is no need for an increase in that share of supply), or involve a target with a UK turnover in excess of GBP 70 million. Whilst such mergers can be called in for review and final determination by the Secretary of State, they are still not subject to mandatory notification requirements.

Foreign state newspaper mergers

The Secretary of State must intervene by issuing a “foreign state intervention notice” if they have reasonable grounds to believe that a “foreign state newspaper merger situation” has been or will be created, i.e. where: (i) a “relevant merger situation” has arisen or will arise, as per topic 9 – with the exception that the turnover threshold is reduced to £2 million; (ii) one of the enterprises involved is a newspaper enterprise; (iii) as a result of the merger, a foreign power is or will be able to control or influence the policy of the newspaper enterprise, or has increased or will increase that control or influence. Following the issuing of such a notice, the CMA must prepare a report setting out its decision as to whether a foreign state newspaper merger situation has been or will be created. If it determines that such a situation has been created, the Secretary of State must block the merger or order its unwinding.

Regulated sectors

Financial services

Changes in the ownership or control of firms authorised by the Financial Conduct Authority and/or regulated by the Prudential Regulation Authority must be approved by the appropriate regulator before going ahead.

Utilities and communications

Mergers involving two or more water companies are in certain circumstances subject to a special water merger regime. Similarly, mergers involving two or more energy network companies (i.e. companies active in gas transportation, electricity transmission or electricity or gas distribution) of the same type are in certain circumstances subject to a special energy network merger regime. In such cases, the CMA remains the final decision-maker, but is subject to a statutory obligation to consult the water regulator (Ofwat) or the energy regulator (Ofgem), as the case may be.

There are no special provisions under UK merger legislation for other regulated utilities such as telecommunications, postal services, rail, airports and air traffic services. A merger in these industries, however, may require the modification of an operating licence or give rise to other issues falling within the ambit or experience of the relevant sectoral regulator. For this reason, the CMA and the sectoral regulators work closely together on such mergers and the sectoral regulator may conduct its own consultation to inform the views it offers to the CMA on the merger (which are non-binding).

Digital markets

Under the UK’s digital markets regulatory regime for the largest digital firms – overseen by the Digital Markets Unit (DMU) within the CMA – firms designated as having “strategic market status” need to notify the CMA of certain transactions, known as “reportable events”.

A reportable event occurs where a firm having strategic market status acquires shares or voting rights in an entity with a UK connection, that acquisition results in the 15%, 25% or 50% threshold being crossed, and the consideration for those shares or voting rights is at least GBP 25 million.

For joint ventures, the value of the capital or assets contributed to the joint venture vehicle, along with any other consideration provided in relation to the formation of the joint venture vehicle, by the firm with strategic market status must be at least GBP 25 million.

An entity has a UK connection where it carries on activities or supplies goods or services in the UK.

Following receipt of confirmation from the CMA that a complete notification has been submitted, a five working day standstill period applies, during which closing is prohibited. In response to the submission of a notification, the CMA may decide to open a merger investigation under the Enterprise Act (assuming it has jurisdiction – on which see topics 9 to 12).

Foreign investment control

The UK does not, technically speaking, operate a foreign direct investment control regime. However, the national security screening regime established by the National Security and Investment Act 2021 (“NSIA”) performs a similar function and captures transactions that would typically be caught by foreign direct investment control regimes in other jurisdictions.

Transactions requiring notification

A transaction will be subject to a mandatory filing requirement under the NSIA where the following three conditions are met:

1. The target is a “qualifying entity” – i.e. it is a UK entity, or a non-UK entity that carries on activities in the UK or supplies persons in the UK.
2. The transaction involves an acquisition of “control” over the target – control for these purposes being an acquisition of shares or voting rights as a result of which the acquirer will exceed the 25% or 50% threshold or will reach the 75% threshold, or of voting rights enabling the acquirer to prevent the passing of any class of company resolution governing the target entity’s affairs.
3. The target entity carries out a “notifiable activity” in the UK – i.e. it is active in one or more of 17 sensitive sectors. (Even if the target entity does not carry out a notifiable activity, the transaction may be called in for ex officio review, see below).

There is no turnover or other financial threshold in respect of either the target or the acquirer, and the jurisdiction in which the acquirer is incorporated or resident is irrelevant to the question of whether a notification is necessary (but may be relevant to the substantive assessment).

Notifiable activities - sensitive sectors:

Activities in the following fields may be notifiable:  

1. advanced materials;
2. advanced robotics;
3. artificial intelligence;
4. civil nuclear;
5. communications;
6. computing hardware;
7. critical suppliers to government;
8. cryptographic authentication;
9. data infrastructure;
10. defence;
11. energy;
12. military and dual-use;
13. quantum technologies;
14. satellite and space technologies;
15. suppliers to the emergency services;
16. synthetic biology; and
17. transport.

Procedure

The acquirer must inform the UK Government of the intended transaction using the prescribed NSIA notification form, which must be submitted to the Investment Security Unit via the NSI online portal.

The Investment Security Unit, which forms part of the UK Government Cabinet Office, administers the NSIA regime. However, the decision on whether to “call in” a transaction for a detailed national security assessment and, ultimately, on whether to require remedies or block the transaction altogether, is taken by the Secretary of State.

After the notification has been confirmed as complete by the ISU, an initial 30-working day “review period” begins to run, by the end of which the transaction must either be approved or called in for a more detailed review. A call-in initiates another 30-working day “assessment period”, which can be extended by another 45 working days if necessary, and can be further extended with the consent of the notifying party.

Completion of the transaction is prohibited pending receipt of approval from the Secretary of State (as to the sanctions in case of breach, see below).

Ex-officio review and voluntary notifications

The Secretary of State also has the ability to call in certain transactions which were not notified to the ISU, for a period of five years following the date of completion, or six months following the Secretary of State having become aware of them, provided they were completed on or after 12 November 2020.

This call-in power applies to transactions which meet the conditions for mandatory notification, as well as those involving acquisitions of control over UK assets or overseas assets used in connection with activities in the UK or to supply persons in the UK, and acquisitions of material influence (on which see topic 11) over qualifying entities. Significantly, there is no need for the target entity or assets to be active in one of the 17 sensitive sectors – thus any qualifying transaction could be called in for review if the Secretary of State considers it could give rise to national security concerns.

In view of these powers, merger parties may wish to consider submitting a voluntary notification where the conditions for mandatory notification are not met but the possibility of the transaction being viewed as giving rise to national security concerns cannot be ruled out (for example, where the target is active in a sensitive sector but the acquirer is only acquiring material influence over it, or where the transaction involves an asset rather than a share purchase).

Outcomes

The Secretary of State can approve the transaction unconditionally, or implement measures to mitigate any national security concerns identified. Such measures can include, for example, restrictions on access to sensitive locations, limiting access to confidential information, and requiring the transfer of intellectual property. Ultimately, the Secretary of State is able block a transaction outright or, in the case of a completed acquisition, mandate its unwinding.

Sanctions

Completing a notifiable acquisition without approval is a criminal offence, carrying up to five years’ imprisonment for individuals and/or an unlimited fine. It can also attract civil penalties for individuals and entities of up to the greater of £10 million / 5% of worldwide turnover.

The underlying transaction will be void as a matter of law (even if no national security risk arises from the transaction).

It is possible to apply for retrospective validation. A successful application will result in the transaction no longer being void, but does not remove any criminal liability.

Other offences apply for contravening interim or final orders, failing to comply with information requests, or supplying false/misleading evidence.

7) Are any parts of the territory exempted or covered by particular regulation?

No.

8) Is merger filing mandatory or voluntary?

Merger filing is voluntary and parties may, as a matter of principle, complete a transaction without prior clearance from the CMA. However, should the CMA decide to investigate a merger – whether on its own initiative, or following a comment or complaint from a third party – it has the power to issue an initial enforcement order to prevent integration of the target business or any other pre-emptive action (i.e. steps which might prejudice the outcome of an investigation or impede the taking of remedial action). Subject to the relevant jurisdictional tests being met (or the CMA considering that the jurisdictional tests may be met), the CMA has the power to investigate a completed merger for a period of four months from the later of 1) completion or 2) the date on which it was made public or the CMA was informed of it.

The CMA has a dedicated Mergers Intelligence Committee which monitors merger activity and may contact the parties to unnotified mergers and request information to assist the CMA in determining whether the transaction could give rise to competition concerns and whether the CMA has jurisdiction. If so, the CMA may decide to launch a formal investigation, which could result in an in-depth Phase 2 investigation being initiated and, ultimately, the imposition of remedies – which could include an obligation to unwind the transaction.

Given the potential for adverse practical and commercial consequences should the CMA decide to review an unnotified merger, and the attendant risk for an acquirer should it agree to an unconditional acquisition of the target business, it may be commercially desirable to notify a merger voluntarily to the CMA to obtain certainty as to whether it will be allowed to proceed, before completing the transaction.

9) Is there a general definition of transactions subject to merger control?

UK merger control applies to “relevant merger situations”. A relevant merger situation is created if:

1. two or more “enterprises” cease to be distinct, or arrangements are in progress or in contemplation which, if put into effect, will lead to enterprises ceasing to be distinct; and
2. the jurisdictional thresholds are met (see topic 14).

An “enterprise” is defined in the Enterprise Act as “the activities, or part of the activities, of a business”. An enterprise need not comprise a distinct legal entity or take a particular legal form – all that is required is that the activities in question could be carried on for gain or reward (regardless of whether they have previously been conducted on a profit-making basis). An enterprise may comprise any number of components, but will generally include some combination of the assets and records needed to carry on certain activities of a business, the employees working in the business, and the business’s existing contracts and/or goodwill. However, a collection of assets or employees alone may be sufficient to constitute an enterprise where they enable a particular business activity to be continued.

Enterprises “cease to be distinct” if they are brought under common ownership or common control (see topic 10).

10) Is "change of control" of a business required?

Yes. This can involve the acquiring enterprise obtaining control over a previously independent enterprise, or moving from one level of control over another enterprise to a higher level of control (see topic 11).

11) How is “control” defined?

The Enterprise Act distinguishes three levels of interest that amount to “control” for the purposes of determining whether enterprises have ceased or will cease to be distinct (in ascending order):

1. Material influence – namely the acquirer’s ability materially to influence policy relevant to the behaviour of the target entity in the marketplace, including the management of the target’s business, its strategic direction, its commercial objectives, and its ability to achieve those objectives.  This may be found based on the acquirer’s ability to influence the target’s policy through exercising votes at shareholders’ meetings (see topic 12), through board representation, and/or through other arrangements (which could include the provision of consultancy services, or financial arrangements which grant influence over an enterprise’s commercial policy). The material influence test enables the CMA to review a wide range of transactions.
2. De facto control – which arises where an entity acquires the ability unilaterally to determine a company’s policy, notwithstanding that it holds less than the majority of the voting rights in that company. This can include situations where, based on attendance patterns, the acquirer has control over more than half the votes cast at shareholder meetings, or where an investor’s industry expertise might lead to its advice being followed to a greater extent than its shareholding would seem to warrant.
3. Controlling interest (known as de jure or legal control) – this generally means a shareholding conferring more than 50% of the voting rights in a company. Only one person can have a controlling interest in a company, but this does not prevent another person – such as a significant minority shareholder – having material influence over the company’s policy (see topic 13).

12) Acquisition of a minority interest

An acquisition of a minority interest may constitute a merger where it results in the acquirer obtaining de facto control or material influence over the policy of the target enterprise, as detailed in topic 11.

As a general rule, the CMA is likely to view a share of voting rights of over 25% as conferring material influence over the target enterprise, given it will typically allow the acquirer to block decisions requiring a special resolution. Shares of voting rights of below 25% are less likely to confer material influence. However, the CMA may examine them to determine whether they might enable the acquirer to exercise material influence over the commercial policy of the target business, including by reference to the distribution of the remaining voting rights, patterns of voting at recent shareholder meetings, the status and relevant industry expertise of the acquirer, and/or any special voting or veto rights attaching to the minority shareholding. The CMA has only rarely found shares of voting rights of below 15% to confer material influence – typically they will only attract scrutiny in the presence of other factors indicating an ability to exercise material influence over the target’s policy.

An acquirer of a minority interest may also be able materially to influence the policy of the target entity through board representation, whether on its own or in combination with voting rights at shareholder level. The CMA will review a range of factors in this regard, including the corporate/industry expertise, other relevant experience, and incentives of the various members of the board. The CMA will take board representation rights into account even where they are yet to be exercised and/or there is no certainty as to whether they will be exercised in future.

13) Joint ventures/joint control – which transactions constitute mergers?

A joint venture will constitute a merger if it involves two previously independent enterprises ceasing to be distinct. This will be the case where an enterprise which was previously solely legally controlled by one entity becomes subject also to the control of another, independent enterprise (e.g. where that other enterprise acquires a shareholding or other rights conferring an ability materially to influence the jointly-controlled enterprise’s policy). 

The establishing of a true “greenfield” joint venture – i.e. one that involves the joint venture parents commencing an entirely new business activity – will not typically constitute a merger, on the basis that it does not involve enterprises ceasing to be distinct (assuming the joint venture parents remain structurally and operationally independent from each other). Unlike under the EU Merger Regulation, there is no concept of a “full function joint venture” which is subject to merger control. The creation of a new joint venture will therefore only amount to a merger if one or both joint venture parents contribute existing assets amounting to an enterprise to the joint venture entity, such that the existing enterprise(s) cease(s) to be distinct from each of the joint venture parents.

14) Which thresholds decide whether a merger notification must be filed?
(Unless explicitly stated otherwise, the thresholds described under one threshold category are not cumulative with those described under another category. Thus for instance if there is a market share threshold and a turnover threshold, it is sufficient to meet one of these, unless stated otherwise.)

a) Turnover thresholds

Merger filing is voluntary in the UK. However, the CMA will have jurisdiction potentially to refer a merger for an in-depth Phase 2 investigation (should the merger be notified or the CMA decide to investigate it ex officio) where the “turnover test”, the “share of supply test” or the “hybrid test” is met.

The turnover test is met when the UK turnover associated with the enterprise being acquired (i.e. the target) exceeds GBP 100 million.

b) Market share thresholds

The share of supply test is met when the businesses which have ceased or will cease to be distinct both supply or acquire goods or services of a particular description in the UK and will, after the merger, together supply or acquire 25% or more of those goods or services in the UK or a substantial part of the UK. A de minimis exemption also applies, pursuant to which a relevant merger situation will not be created by virtue of the share of supply test where the UK turnover of each of the target and acquirer(s) is below GBP 10 million.

It should be noted that this is not a market share test as it does not require an economic “market” to be defined in respect of the relevant goods or services. The CMA enjoys a broad discretion in its application of the test, in particular as to how it identifies or describes the relevant category of goods or services, how it calculates whether a 25% share has been met, and what constitutes a “substantial part” of the UK. Additionally, the CMA may assert jurisdiction to investigate a merger on the basis that it considers that the share of supply test may be met, a question on which it need only reach a definitive answer at the end of the Phase 1 investigation. Consequently, should the CMA have preliminary substantive concerns about a merger, it may be difficult for the parties to avoid a Phase 1 investigation by challenging the CMA’s jurisdiction under the share of supply test.

c) Value of transaction thresholds

N/A

d) Assets requirements

N/A

e) Other

The hybrid test is met where: (i) one of the enterprises ceasing to be distinct supplies or acquires 33% or more of goods or services of a particular description in the UK or a substantial part of the UK and has a UK turnover exceeding GBP 350 million; and (ii) the other enterprise is a UK entity, has activities in the UK, or supplies goods or services to UK persons.

The hybrid test is intended to assist the CMA in establishing jurisdiction over so-called “killer acquisitions”, as there is no target turnover requirement and no need for an overlap between the activities of the merger parties.

15) Special thresholds for particular businesses

For mergers between water companies, only the turnover test applies.

See topic 6 for details of special thresholds applying in relation to special public interest and foreign state newspaper mergers, and acquisitions by firms with strategic market status.

16) Rules on calculation and geographical allocation of turnover

The relevant period used for determining turnover is the business year preceding either the date the enterprises ceased to be distinct, or the date of the CMA's decision on whether or not to make a Phase 2 reference. However, the CMA may substitute such earlier date as it considers appropriate.

The applicable turnover comprises the amount derived from the sale of products and/or provision of services to customers in the UK, minus any sales rebates, value added tax and other taxes directly related to that turnover. Intra-group sales are excluded.

Is the seller/seller's group turnover relevant in a standard acquisition of sole control?

No.

17) Special rules on calculation of turnover for particular businesses

Credit institutions or financial institutions

The applicable turnover of an enterprise which, in whole or in part, is a credit institution or financial institution is the sum of the following specified income received by the branch or division of that institution in the UK, after the deduction of value added tax and other taxes directly related to those items:

1. interest income and similar income
2. income from securities:
3. income from shares and other variable yield securities
4. income from participating interests
5. income from shares in affiliated undertakings
6. commissions receivable
7. net profit on financial operations, and
8. other operating income.

Insurance undertakings

The applicable turnover of an enterprise which, in whole or in part, is an insurance undertaking is the value of the gross premiums received from residents of the UK after deduction of taxes and certain other premium related deductions. Gross premiums received comprises all amounts received together with all amounts receivable in respect of insurance contracts issued by or on behalf of an insurance undertaking, including outgoing reinsurance premiums.

18) Series of transactions that must be treated as one transaction

At its discretion, the CMA can apply sections 27(5) and 29 of the Enterprise Act to allow it to treat a series of transactions through which a party acquires material influence over or control of an enterprise within a single two-year period as having occurred simultaneously on the date of the last transaction. 

In exercising its discretion, the CMA will have regard to the nature and extent of any competition issues associated with the merger. The CMA may also take into consideration any transactions in contemplation by the parties that have yet to be implemented. 

19) Temporary change of control

Temporary changes of control are not exempt from UK merger control.

The Enterprise Act does not define the period of time a merger must last in order for it to constitute a relevant merger situation. An acquisition of control intended purely as a temporary step in a wider overall transaction could therefore, in theory, constitute a relevant merger situation. This could include stake-building transactions (see topic 18), warehousing arrangements (where a transferring business is temporarily acquired by an interim buyer with a view to the subsequent onward sale of the business to an ultimate acquirer) and break-up bids (where an enterprise is purchased pursuant to an agreement that it will be divided up between acquirers according to a pre-existing plan upon completion).

In such a scenario, the CMA is unlikely to investigate the initial acquisition on its own initiative where it is clear that it is merely an interim step in a wider transaction and that the subsequent steps will occur within the four-month period the CMA has to refer the initial acquisition. If the initial acquisition is voluntarily notified, the CMA will ignore the temporary nature of that transaction when determining whether it can be expected to give rise to substantive competition concerns.

20) Special industries, owners or types of transactions

N/A

21) Transactions involving only foreign businesses (foreign-to-foreign)

There is no exemption for foreign-to-foreign transactions. All mergers that meet the thresholds are potentially subject to the application of UK merger control, regardless of where the undertakings concerned are registered, operate or own assets. As noted in relation to topic 14b, the CMA enjoys a significant degree of discretion in applying the share of supply test – this has enabled it to assert jurisdiction over foreign-to-foreign mergers where the enterprises being acquired generated no turnover in the UK.

22) No overlap of activities of the parties

Provided at least one of the thresholds detailed in topic 14 is met, a merger is potentially subject to the application of UK merger control. There is no exemption for transactions where the activities of the parties do not overlap (although the share of supply test cannot be met unless both the acquiring and acquired enterprises supply or acquire goods or services of a particular description).

23) Other exemptions from notification duty even if thresholds ARE met?

N/A

24) May a merging party file voluntarily even if the thresholds are not exceeded?

No. However, given the inherent flexibility of the share of supply test (on which see topic 14), it may be difficult to rule out the possibility of jurisdiction being established by the CMA. In such circumstances, merger parties may wish to discuss the proposed merger with the CMA, to clarify whether the CMA is able and wishes to investigate the transaction. This may be done by preparing and submitting a short Briefing Paper setting out the essential elements of the transaction and the merger parties’ views on whether the transaction amounts to a relevant merger situation. The parties may generally only submit a Briefing Paper after the merger agreement is signed. The Paper will be looked at by a screening committee within the CMA (the Mergers Intelligence Committee), not a full case team.

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

No. However, it should be noted that, as detailed in topic 14, the CMA may assert jurisdiction to investigate a merger on the basis that it believes that the jurisdictional thresholds may be met, and it need only reach a conclusion on jurisdiction at the end of its Phase 1 investigation. Further, the flexible nature of the share of supply test means that it can be difficult to rule out the possibility of jurisdiction being asserted or established on that basis – even where the parties’ combined share of any recognised market is below 25%.

Additionally, where the jurisdictional thresholds are not met, the Secretary of State may intervene in mergers that qualify as special merger situations (see topic 15). In such cases, the CMA will not conduct a competition assessment, and will instead advise the Secretary of State on whether a special merger situation has been created and summarise representations received in relation to the merger from third party experts, such as the Office of Communications. The decision on whether to refer the merger for a Phase 2 investigation and, ultimately, whether to clear it, is taken by the Secretary of State.

26) Referral within the jurisdiction

Although such mergers are not technically referred by the CMA, where a public interest intervention notice has been issued, the ultimate decision-maker in respect of the merger is the Secretary of State.

27) Referral from another jurisdiction

N/A

28) Referral to another jurisdiction

N/A

29) May the merging parties request or oppose a referral decision?

N/A

30) Stage of transaction when notification must be filed

As noted in topic 8, there is no mandatory filing obligation in the UK and therefore no specific deadline by which a notification must be filed.

Should the parties to a merger decide voluntarily to notify the transaction to the CMA, they may formally do so once the merger is in the public domain and the CMA has confirmed that the Merger Notice (see topic 33) is complete.

31) Pre-notification consultations

The CMA encourages pre-notification discussions for all mergers, regardless of whether they are in the public domain or not, provided they are not still hypothetical. Where merger parties are yet to sign a share purchase agreement (or equivalent), to commence pre-notification discussions through the submission of a Case Team Allocation Request Form they must provide evidence of a good faith intention to proceed with the merger, such as the agreeing of heads of terms.

The pre-notification process is intended to facilitate clarification of the information and evidence the CMA will (or will not) require for the purposes of the Merger Notice, as well as informal dialogue on the CMA’s likely approach to the assessment of competition concerns arising from the merger, including its approach to evidence gathering, and the parties’ initial views on any specific theories of harm the CMA may be considering. In some cases, pre-notification can also be an opportunity for informal discussions on potential remedy options, should a competition concern ultimately be found.

Where merger parties do not intend formally to notify a merger to the CMA for investigation, they can submit a short Briefing Paper explaining why, in their view, the merger does not give rise to a relevant merger situation and/or a substantial lessening of competition. Generally speaking, this can only be done after the parties have signed the merger agreement. The Briefing Paper will be considered by the CMA’s Mergers Intelligence Committee, which may follow up with the merger parties to better understand their submission. Subsequently, the Mergers Intelligence Committee will either decide that the merger is to be investigated (requiring the appointment of a formal CMA case team), or will indicate that it has no further questions about the merger at that stage (this does not preclude the CMA from asking further questions or deciding to investigate the transaction, should additional relevant information come to light).

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

In the case of public takeover bids, the CMA will expect at least a public announcement of a firm intention to make an offer, or the announcement of a possible offer, to have been made before it opens its Phase 1 investigation. 

33) Forms available for completing a notification

The notification must be made using the statutory form known as a "Merger Notice". 

34) Languages that may be applied in notifications and communication

English.

35) Documents that must be supplied with notification

The following documents must be supplied with the Merger Notice:

1. A press release or report and details of all notifications to listing authorities or any other document detailing that the merger has been made public
2. A copy (or if not available, the latest draft) of the documents bringing about the merger, e.g. heads of terms, memorandum of understand, sale and purchase agreement
3. The most recent annual report and accounts for each of the acquirer and acquirer group, and the target
4. Copies of the most recent business plan of the acquirer and acquirer group and the target
5. Copies of documents prepared for or received by the board, senior management, or shareholders’ meeting of either merger party and which: set out the rationale for the merger; assess the merger with respect to competitive conditions, competitors, potential sales growth or expansion, market conditions or market shares (including post-merger business plans); or assess the valuation of the target business for the purpose of the merger
6. Copies of documents prepared or published in the last two years which have been prepared by or for, or received by, any member of the board or senior management of either merger party and which set out the competitive conditions, market conditions, market shares, competitors, or the merging parties’ business plans in relation to the product(s) or service(s) where the merger parties have horizontal overlap.

36) Filing fees

The filing fee depends on the UK turnover of the target. Current fees are:

Fees are payable by the person or persons submitting the notification.

37) Is implementation of the merger before approval prohibited?

As noted in topic 8, there is no mandatory filing obligation in the UK, and therefore no requirement to obtain approval from the CMA before implementing a merger, even where the relevant jurisdictional thresholds are satisfied. However, in practice, once the CMA has begun to investigate a merger, the parties’ ability to implement the transaction will be significantly curtailed.

During its Phase 1 review process (and even prior to Phase 1 formally commencing, where the CMA has reasonable grounds for suspecting that two or more enterprises have ceased to be distinct, or that arrangements are in place or in contemplation that will result in enterprises ceasing to be distinct), the CMA may impose an initial enforcement order on the parties, preventing them from integrating their businesses, transferring control of the target business, impairing the ability of the target to compete independently in the markets affected by the merger, or taking any other action which might inhibit the CMA’s ability to remedy the anticompetitive effects of the merger. The CMA will typically issue an initial enforcement order in relation to every completed merger it is investigating; increasingly it is doing the same in respect of anticipated mergers – this will usually not prevent contractual completion from occurring, but will prevent any post-completion implementation steps.

Should a merger be referred for an in-depth Phase 2 investigation, the CMA may impose an interim order on the parties, which replaces (and potentially expands upon) any initial enforcement order imposed at Phase 1 (initial enforcement orders and interim orders are together referred to as “interim measures”). Alternatively, the parties may agree bespoke interim undertakings with the CMA (typically used in relation to anticipated mergers only).

In the absence of interim measures, once a merger is referred to Phase 2 the parties will in any event be subject to a statutory bar on, in the case of anticipated mergers, acquiring the target’s shares and, in the case of completed mergers, completing any further matters in connection with the merger arrangements or transferring ownership or control of the target business, without the CMA’s prior approval (this bar applies only to UK persons or persons carrying on business in the UK). However, this statutory bar does not prevent an acquirer from acquiring the target’s shares where it had already, at the time of referral, entered into a conditional share purchase agreement which has since become unconditional.

38) May the parties get permission to implement before approval?

Parties that are subject to interim measures may submit a request for a derogation from the CMA to carry out certain (limited) actions that would otherwise constitute a breach of their obligations under the relevant order. Such requests should be sufficiently specified, reasoned, and evidenced. The CMA is likely to reject derogation requests in relation to matters that could negatively impact on competition between the merging parties, for example by compromising the target’s competitive capability. However, in some circumstances, e.g. where the target is in severe financial difficulty, the CMA may permit the acquiring business to exercise direct control over the commercial policy of the target business or appoint an independent manager to run that business, subject to suitable safeguards being put in place. Merger parties may also request early release from some or all of their obligations under interim measures once it becomes clear to the CMA that the transaction (or part of it) does not give rise to competition concerns.

Where a merger has been referred to a Phase 2 investigation and no interim measures are in place, the parties may request the CMA’s prior approval to complete an anticipated merger and/or undertake implementing steps, notwithstanding the statutory bar mentioned in topic 37. The CMA is generally unlikely to grant such requests, but may be willing to consent to completion to allow a transaction to complete at a global level, subject to introducing an interim order and other safeguards to prevent pre-emptive action in the UK.

39) Due diligence and other preparatory steps

Due diligence must be conducted in a way that ensures it complies with Chapter I of the Competition Act, which prohibits anticompetitive concerted practices such as the exchange of commercially sensitive information between competitors. To that end, where such information is to be shared between the merging parties, and the exchange has the potential to impact competition (i.e. because the merging parties are competitors), relevant safeguards are likely to include: taking steps to ensure information is appropriately ring-fenced; restricting information to internal and/or external “clean teams”, in relation to whom the relevant information is not competitively sensitive; and the use of non-disclosure agreements to prevent disclosure of the information to unauthorised recipients.

Additionally, where a merger is being reviewed by the CMA and the parties are subject to interim measures, the sharing of confidential information between the parties could amount to a breach of those measures, as could the taking of other preparatory steps. Once such measures are in place, it is incumbent on the merging parties to assess whether information exchange or other steps might amount to pre-emptive action, and apply to the CMA for a derogation.

40) Veto rights before closing and "Ordinary course of business" clauses

Where interim measures are in place or the Phase 2 statutory bar applies (see topic 37), the acquirer must not exercise any control over the commercial policy of the target enterprise. However, the merger parties may request a derogation from the CMA enabling the acquirer to obtain rights of approval over certain elements of the target’s commercial activity, to ensure the target business is being maintained as a going concern. Actions in relation to which such acquirer approval may be appropriate include approval of capital expenditure which had not previously been budgeted for, and entering into customer/supplier contracts above a certain financial threshold.

An “ordinary course of business” clause that prevents the target company from taking decisions outside the ordinary course of its business until the completion date is generally considered acceptable and will not require a specific derogation from the CMA.

41) Implementation outside the jurisdiction before approval – "Carve out"

Where interim measures are in place, it may be possible to obtain a derogation from the CMA permitting implementation of the transaction outside the UK. In deciding whether such a derogation would be appropriate, the CMA will carefully consider whether the UK and non-UK target businesses share common resources such as personnel, intellectual property and know-how. It may be difficult to satisfy the CMA that implementation outside the UK will not impact the UK target business’s ability to compete independently. In practice, it will therefore be more straightforward to obtain such a derogation where the investigation is at a more advanced stage and the scope of any competition concerns has become clearer.

42) Consequences of implementing without approval/permission

As noted in topic 8, filing is voluntary and – where no CMA approval is sought – the potential adverse consequences of implementing without approval stem from the risk of the CMA deciding to investigate the merger post-completion and potentially ordering its unwinding.

Where a transaction is under investigation by the CMA and is subject to interim measures, should the merger parties implement the transaction in breach of those interim measures the CMA can impose penalties of up to 5% of the worldwide group turnover of the party on whom the penalty is imposed.

43) Phases and deadlines

44) Tests or criteria applied when a merger is assessed

The CMA has a duty to assess whether a merger has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the UK for good or services. The standard of proof in relation to this test differs depending on whether the merger is being examined at Phase 1 or Phase 2:

1. At Phase 1, the CMA will consider whether is a “realistic prospect” of the merger giving rise to a substantial lessening of competition.
2. At Phase 2, the CMA will consider whether, on the “balance of probabilities”, the merger will result in a substantial lessening of competition.

45) May any non-competition issues be considered?

No.

Where a merger is subject to a public interest intervention notice (see topics 6 and 15), the CMA will gather information on the relevant matters of public interest, for a decision on them to be taken by the Secretary of State.

46) Special tests or criteria applicable for joint ventures

The assessment for joint ventures is the same as for other mergers, as only joint ventures that amount to a "merger" (see topic 13) are subject to UK merger control.

Joint ventures that do not amount to a merger will be assessed under the general prohibition against anti-competitive agreements contained in Chapter I of the Competition Act.

47) Decisions and remedies/commitments available

A merger may be: found not to qualify as a relevant merger situation; unconditionally approved; conditionally approved with commitments/remedies; or prohibited. A prohibition is only possible at the end of the Phase 2 investigation.

During a Phase 1 investigation, remedies (known as “undertakings in lieu of reference”) may be offered by the parties to address competition concerns identified by the CMA and thereby avoid a reference to a Phase 2 investigation. This may be done early in the Phase 1 process, or up to 5 working days after the CMA has issued its Phase 1 decision finding a realistic prospect of a substantial lessening of competition. During Phase 2, the parties are also encouraged to engage in “without prejudice” discussions on suitable remedies at an early stage of the investigation. However, the parties may also wait until the publication of the CMA’s Phase 2 interim report, which will clarify the scope and extent of the CMA’s competition concerns, before submitting a remedy proposal.

Commitments/remedies may take any form and can be either structural or behavioural, although the CMA has a preference for structural remedies – particularly at Phase 1, where undertakings in lieu of reference must be “clear cut” in addressing the competition concerns identified.

48) How and when will details about the merger be published?

Where a transaction is notified to the CMA, the CMA will publicly announce that a Merger Notice has been received and will invite third parties to comment. In some cases the CMA may issue a public invitation to comment before submission of the final Merger Notice. The CMA website has a dedicated page for each merger under investigation, on which the CMA publishes updates on interim decisions, hearings etc. as the decision-making process progresses.

Final decisions are published, although the parties are given the opportunity to request the redaction of any commercially sensitive information prior to publication. A Phase 2 decision is usually considerably longer than a Phase 1 decision, including numerous annexes setting out third party submissions, economists' reports and survey findings, as well as the parties' own submissions.

Where the CMA is investigating a merger ex officio, it will issue a public invitation to comment ahead of launching its formal Phase 1 investigation, to allow interested parties to submit to the CMA any initial views on the impact that the transaction could have on competition in the UK.

49) Access to the file for the merging parties and third parties

The merging parties:

Unlike procedures before merger control authorities in other jurisdictions, there is no general right of access to the file in CMA merger control proceedings and the CMA is not, as a general principle, obliged to disclose all inculpatory or external material.

The CMA is, however, required to consult any party whose interests are likely to be adversely affected by its proposed decision on the outcome of a merger. At the same time, it is under an obligation not to disclose confidential information received during a merger inquiry, unless necessary to the exercise of its functions under the Enterprise Act. This necessarily involves a balancing act, and the CMA will deem disclosure of confidential information necessary where it forms part of the essential elements (or “gist”) of the case the merger parties must answer. In disclosing such information, the CMA will seek to maintain confidentiality as far as possible, for example through the use of redactions or summaries, or confidentiality rings or data rooms.

Third parties:

As mentioned above, there is no general right of access to the file in CMA merger control proceedings. However, the CMA will disclose certain information as necessary in performance of its statutory functions. Transparency is much greater in Phase 2, during which non-confidential versions of most or all submissions received (including from the merger parties) are published on the CMA’s website, as well as the CMA’s provisional findings, ahead of publication of the final report. During Phase 1, only a summary decision and non-confidential decision are published, as well as any remedies offered by the merger parties.

50) Who can appeal and what may be appealed?

The merging parties and other persons aggrieved (i.e. third parties who can demonstrate their interests have been adversely affected) by a decision of the CMA in relation to a merger investigation can bring an appeal before the Competition Appeal Tribunal, and from there to the Court of Appeal and then the Supreme Court. Procedural decisions may be appealed, as well as decisions on whether to refer, approve or prohibit a merger.

Appeals are determined on a “judicial review” basis. This means that, rather than re-examining the merits of the relevant decision, the Tribunal or Court will assess the legality of the decision-making process, including whether the decision maker’s conclusions were adequately supported by evidence, whether all material facts were taken into account, and whether a fair and proper procedure was applied. In effect, to overturn a CMA decision it will be necessary to establish that the CMA’s decision-making process was flawed in such a way that the decision was an unreasonable one to reach.