How Jurisdictional Variances Impact M&A Timelines

Cross-border M&A deals face delays due to different rules in over 130 jurisdictions. Filing requirements, review timelines, and evaluation criteria vary widely, creating bottlenecks and uncertainties. For example, Microsoft’s $68.7B acquisition of Activision Blizzard in 2023 was delayed due to conflicting decisions from UK and EU regulators.

Key challenges include:

• Filing thresholds: Requirements differ by country (e.g., US focuses on transaction size; EU uses revenue-based thresholds).
• Timelines: Reviews can take months, with second-phase investigations causing further delays.
• Conflicting decisions: Regulators may impose remedies that clash across jurisdictions.

To minimize delays:

1. Plan early: Map out regulatory requirements and timelines for each region.
2. Engage regulators: Hold pre-filing consultations to address potential concerns upfront.
3. Leverage expertise: Work with M&A advisors to manage filings and align strategies.

These steps help navigate the complex regulatory landscape and reduce risks of extended timelines or blocked deals.

Major Differences in Merger Control Rules by Country

Merger control rules differ significantly from one country to another, creating a maze of requirements for businesses to navigate. In the United States, the process is governed by the Hart-Scott-Rodino (HSR) Act, which emphasizes pre-merger notifications and antitrust reviews. Over in the European Union, the EU Merger Regulation centralizes the review process for transactions that meet specific thresholds. Meanwhile, the United Kingdom relies on the Enterprise Act 2002, with additional oversight under the National Security and Investment Act (NSI Act).

These systems are not just distinct in their legal frameworks; they also vary in notification triggers, review methods, and levels of regulatory intervention. While the EU and UK have started incorporating concerns like national security and foreign subsidies into their evaluations, the US remains focused on antitrust issues. These differences influence when deals need to be reported and can lead to challenges in managing timelines and regulatory outcomes.

Filing Thresholds and Requirements

One major area of difference is filing thresholds, which dictate when companies must notify authorities about their deals. These thresholds often depend on financial metrics like revenue or asset value, but the specifics vary widely.

• In the United States, the HSR Act sets annual thresholds adjusted for inflation, based on transaction size and the parties involved. This dual approach looks at both the deal's value and the size of the companies.
• The European Union uses a revenue-based system that considers combined global and EU-wide turnover. Companies must meet these benchmarks both globally and within the EU market, which differs from the US's transaction-focused model.
• The United Kingdom applies a mix of turnover and share-of-supply tests. This broader approach means that deals may come under review even if they don’t meet typical financial thresholds, especially in sectors with significant market shares.

Some countries are introducing new, uneven thresholds. For example, the Netherlands is implementing rules that focus on one party's turnover, such as requiring only the buyer to meet specific financial criteria. This change reflects growing concerns about large companies acquiring smaller but strategically important businesses.

Adding to the complexity, the European Commission's Foreign Subsidies Regulation (FSR), introduced in 2023, allows for additional scrutiny of mergers when companies receiving subsidies meet certain thresholds. This creates another layer of filing requirements for companies to consider.

Review Timelines and Legal Deadlines

The timelines for regulatory reviews can also vary widely, creating potential scheduling headaches for businesses involved in cross-border deals.

• In the United States, the initial HSR waiting period is 30 days. However, if regulators issue a "second request" for more information, this can extend the review indefinitely, sometimes adding months to the process.
• The European Union employs a two-phase review system. Phase I lasts 25 working days and covers the initial assessment. If concerns arise, the process moves to Phase II, which can take up to 90 additional working days. While this structured timeline offers some predictability, the total review period can still stretch over several months.
• The UK’s Competition and Markets Authority (CMA) has its own deadlines under the NSI Act, with an initial review period of 30 working days. Most cases - 93%, according to government data - are resolved within this timeframe. However, more complex cases or those requiring remedies can face significant delays.

For companies managing deals across multiple jurisdictions, these varying timelines can create bottlenecks. Without formal coordination between regulators, delays in one region can hold up the entire transaction.

How Regulators Evaluate Mergers

Regulators don’t just differ in timelines and filing requirements; they also use distinct criteria to evaluate mergers. These substantive standards add another layer of complexity to cross-border transactions.

• In the United States, regulators focus on whether a merger would create or increase market power, potentially harming consumers through higher prices, reduced innovation, or lower quality. This evaluation relies heavily on economic analysis of market concentration.
• The European Union also uses a market dominance test but takes a broader view, considering how a merger might impact market structure and competition as a whole. This can lead to different conclusions compared to the US, especially for deals involving market leaders.
• The United Kingdom applies similar competition tests but has expanded its scope to include national security and foreign subsidy concerns. The NSI Act allows the government to scrutinize deals on national security grounds, even if there are no competition concerns.

In recent years, regulators have increasingly targeted acquisitions in technology and critical sectors, especially so-called "killer" and "serial acquisitions." These deals often face additional scrutiny based on public interest or sector-specific criteria, regardless of traditional market share metrics.

The Netherlands is also introducing reforms that give regulators more opportunities to intervene. For example, they can act within four weeks of a public announcement, four weeks after discovering a deal, or up to six months post-completion. This reflects a broader trend toward more extensive regulatory oversight.

These differences in evaluation criteria can lead to conflicting outcomes. For instance, one jurisdiction might approve a deal while another blocks it or imposes different remedies. Without coordination between regulators, companies need to prepare for the possibility of inconsistent decisions, which can delay or even derail cross-border transactions.

How Regulatory Differences Delay M&A Timelines

Cross-border M&A deals often face significant delays due to the complex and varied regulatory requirements across different jurisdictions. Even with meticulous planning, navigating the regulatory maze in over 130 jurisdictions can create bottlenecks, particularly during the filing process.

Multiple Filing Requirements

When a transaction spans multiple jurisdictions, companies must manage a tangle of filing requirements, each with its own unique demands. This process is rarely straightforward.

One of the first hurdles is non-simultaneous filing deadlines. Ideally, companies would file in all jurisdictions at the same time, but differences in required documentation and the involvement of local legal counsel make this nearly impossible. For example, a deal involving the US, EU, and China demands separate filings, each with distinct forms and supporting documents.

Translation requirements further complicate matters. Documents prepared in English for US regulators often need to be translated into several languages for other regions. These translations must be legally validated, adding weeks to the preparation process.

The lack of globally aligned processes forces companies to juggle contradictory requirements. While some authorities require extensive pre-notification discussions, others impose strict deadlines that leave little room for preparation. If one jurisdiction requests changes that impact the deal's structure, companies may need to revise filings elsewhere, causing a ripple effect of delays.

Adding to the complexity, documentation standards vary widely. For instance, the European Commission might demand detailed market analysis that differs significantly from what US regulators require. Meanwhile, authorities in Asia may prioritize different competitive concerns, necessitating additional studies and assessments.

Extended Reviews and Last-Minute Challenges

Filing issues are only the beginning. Prolonged regulatory reviews can stretch timelines further. A delay in one jurisdiction often holds up the entire transaction, as deals typically cannot close until all necessary approvals are secured.

The second-phase investigation process exemplifies this challenge. If the European Commission or US antitrust authorities decide to conduct deeper reviews, the timeline can extend by several months, even if other jurisdictions have already granted approval. This leaves deals in limbo, increasing costs and uncertainty.

Another unpredictable obstacle is last-minute regulatory challenges. Authorities may request additional information or raise new competition concerns late in the process, often due to evolving market conditions. These unexpected developments can derail even the most carefully planned timelines.

Recent regulatory changes have exacerbated these issues. For example, the UK's National Security and Investment Act allows regulators to review deals after their public announcement or if new evidence arises. While most transactions under the NSI Act are approved within the initial 30-working-day review period, a small percentage face extended reviews that disrupt deal timelines.

Divestment remedies add yet another layer of complexity. When regulators require companies to sell assets as a condition of approval, they must find suitable buyers and secure separate approvals for each divestment. This process often shifts the focus from maximizing deal value to meeting regulatory demands, potentially adding months to the timeline.

Conflicting Regulatory Decisions

One of the most challenging scenarios occurs when regulators in different jurisdictions reach conflicting decisions on the same transaction. For instance, one authority might approve a deal while another blocks it or imposes remedies that are incompatible with the first jurisdiction’s requirements. This creates a legal and commercial quagmire that can derail even the most carefully planned transactions.

The Microsoft-Activision Blizzard acquisition highlights this issue. While the European Commission approved the $68.7 billion deal in May 2023, the UK Competition and Markets Authority had blocked it just a month earlier. This forced Microsoft to restructure the transaction, significantly extending the timeline.

Remedy negotiations often complicate matters further. Different jurisdictions may demand conflicting solutions, such as asset divestitures in one region and behavioral commitments in another. Companies are then left navigating irreconcilable positions with no clear resolution.

The growing regulatory scrutiny in industries like technology, pharmaceuticals, and critical materials has increased the likelihood of such conflicts. Regulators are now applying new theories of harm and expanding their oversight, leading to more divergent interpretations of competitive concerns.

Given these complexities, companies often turn to specialized M&A advisory services for guidance. Phoenix Strategy Group offers expertise in coordinating multi-jurisdictional filings and managing regulatory challenges, helping to minimize delays and keep transactions on track. With early regulatory planning and expert support, companies can better navigate the intricate web of global M&A regulations.

How to Manage Regulatory Delays in Cross-Border M&A

Navigating the complex regulatory landscape in cross-border M&A requires early preparation and a clear strategy. Delaying regulatory planning until later stages often leads to conflicting deadlines and unnecessary delays. The solution? Make regulatory considerations a central part of the deal process from the very beginning. Start by identifying the specific regulatory requirements for each jurisdiction involved.

Map Out Regulatory Requirements Early

The cornerstone of a successful cross-border M&A deal is thorough regulatory planning during the early stages. With over 130 jurisdictions enforcing active merger control laws, identifying relevant authorities is a critical first step.

Once the deal structure is defined, begin a jurisdictional analysis. This means reviewing merger control thresholds in all applicable regions, determining if sector-specific reviews are required, and identifying whether foreign investment screening could come into play. This step is especially crucial for technology transactions, where regulators are increasingly scrutinizing deals that don’t meet traditional thresholds.

Creating a regulatory matrix can help you stay organized. Use it to track deadlines, required documentation, translations, and review timelines. Companies that rely on project management tools to monitor these elements often experience fewer compliance issues and missed deadlines.

Engaging local legal counsel early is equally important. Every jurisdiction has unique procedural rules that require local expertise to navigate effectively. For instance, understanding the European Commission's Article 22 referral process can help anticipate additional reviews. In the pharmaceutical industry, companies that proactively collaborated with both the European Commission and national authorities were able to address competition concerns early, securing faster conditional clearances. On the other hand, those who skipped comprehensive jurisdictional mapping faced months-long delays due to regulatory interventions.

Communicate with Regulators Before Filing

Pre-filing consultations are an often overlooked but highly effective way to manage regulatory risks. Regulators, particularly in complex or strategic industries, generally welcome early engagement. These discussions help clarify their expectations and allow companies to address potential concerns before formal submissions are made.

By submitting briefing documents ahead of filing, companies can provide regulators with a clear picture of the transaction’s competitive impact and any proposed remedies. This proactive approach can prevent last-minute scrambling to answer inquiries during the formal review process. However, it’s essential to strike a balance between transparency and strategic discretion, as early disclosures could invite additional scrutiny.

Maintaining open communication throughout the process can build trust with regulatory authorities. Regular updates, prompt responses to information requests, and honest discussions about remedies foster a collaborative environment. This approach often leads to more predictable review timelines and smoother outcomes. For particularly complex or overlapping regulatory scenarios, external expertise can be invaluable.

Work with M&A Advisory Experts

The intricate nature of multi-jurisdictional regulatory compliance makes expert advisory support essential for most cross-border deals. Specialized advisors bring deep regulatory knowledge, established relationships with authorities, and proven strategies for managing filings.

Take Phoenix Strategy Group as an example. With extensive experience in M&A and a track record of operational success, they are well-equipped to anticipate regulatory challenges and craft effective solutions.

Advisors streamline coordination across jurisdictions by aligning filing timelines, ensuring consistent messaging to regulators, and designing flexible deal structures that incorporate regulatory feedback. This coordination is particularly critical when remedies negotiated in one jurisdiction could influence approvals elsewhere.

As Lauren Nagel, CEO of SpokenLayer, shared:

"PSG and David Metzler structured an M&A deal during a very chaotic period in our business, and I couldn't be more pleased with our partnership."

Technology also plays a key role in simplifying regulatory compliance. Advanced data analytics can flag potential competition concerns, while proprietary databases track regulatory precedents, enabling more precise timeline predictions and stronger filings. Experienced advisors can also implement robust due diligence systems to identify compliance issues early, a major advantage for growth-stage companies.

Beyond compliance, expert advisors provide strategic guidance that can shape the overall success of the deal. By evaluating how different regulatory approaches might affect the transaction’s value and timeline, they help companies make informed decisions about structure, remedies, and risk management. This minimizes delays and maximizes the likelihood of a successful outcome.

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New Trends in Merger Control Regulations

Recent developments in merger control regulations highlight a rapidly evolving landscape. Authorities across the globe are expanding their oversight and introducing new rules to address concerns about market concentration, national security, and the competitive impacts of emerging technologies. These changes are especially noticeable in sectors tied to technology and critical infrastructure.

Tighter Review of Technology and Critical Industries

Regulators are paying closer attention to sectors like technology, AI, and critical infrastructure, driven by concerns over future competition and the potential stifling of innovation. Historically, merger reviews focused on immediate effects on competition, but the focus has now shifted to long-term market dynamics.

Deals involving digital platforms, AI, and data-driven technologies are under greater scrutiny - even when the companies involved hold modest market shares. This reflects the understanding that dominance in the tech industry often stems from data control, network effects, and ecosystem leverage rather than traditional market share metrics.

Critical infrastructure sectors, such as telecommunications, energy, and defense, are also facing intensified regulatory reviews, particularly for national security reasons. For example, the UK's National Security and Investment Act gives the government authority to examine and potentially block transactions in sensitive industries, regardless of their size or value.

These changes mean that companies operating in these sectors, even those previously flying under the radar, may now encounter extensive regulatory reviews. This requires more rigorous due diligence and extended preparation timelines.

New Filing Requirements and Rules

Recent regulatory updates have added new layers of filing and notification obligations. The EU's Digital Markets Act and Foreign Subsidies Regulation are prime examples, introducing disclosure requirements that go beyond traditional merger control.

The Foreign Subsidies Regulation, effective since July 2023, mandates that companies notify the European Commission of transactions if they’ve received over $4.3 million in foreign financial contributions within the prior three years. This can be particularly challenging for companies with intricate international funding structures.

The Digital Markets Act imposes specific rules on large digital platforms identified as "gatekeepers", influencing how these companies approach acquisitions and partnerships. The act emphasizes fair competition and broader market considerations, requiring companies to adjust their strategies accordingly.

Similarly, the UK's National Security and Investment Act requires pre-closing notifications for deals in 17 sensitive sectors - including artificial intelligence, quantum technologies, and key government suppliers - regardless of the transaction value. These additional requirements mean dealmakers must integrate regulatory processes earlier in their planning, leading to longer timelines and higher compliance costs. Regulators now also have broader powers to intervene.

Expanded Regulatory Review Powers

One of the most striking trends is the expansion of discretionary powers, enabling regulators to review transactions even if they fall below traditional notification thresholds. This shift has redefined how companies assess risks, as deals previously considered exempt from scrutiny may now face regulatory intervention.

Both the European Commission and the UK Competition and Markets Authority (CMA) have introduced "call-in" powers. The CMA's "hybrid test" allows it to evaluate acquisitions involving startups or companies with limited UK operations, focusing on their potential to influence future competition or innovation rather than current market standings.

Several high-profile cases illustrate how these expanded powers are impacting timelines and outcomes:

These examples underscore the importance of considering factors beyond traditional thresholds, such as sector sensitivity, innovation potential, and national strategic interests.

The increasing unpredictability of regulatory reviews calls for more adaptable deal structures and extended preparation timelines. In this complex environment, firms like Phoenix Strategy Group play a critical role in guiding companies through regulatory challenges. Their expertise helps businesses anticipate potential obstacles and design transactions that minimize risks while aligning with their strategic goals.

Conclusion: Managing Regulatory Complexity in M&A Deals

Navigating the regulatory maze of modern cross-border M&A deals requires a well-thought-out strategy. With over 130 jurisdictions enforcing active merger control regimes - each with unique filing thresholds, timelines, and evaluation criteria - securing regulatory clearance has become far more intricate than it once was.

Take, for instance, Microsoft's $68.7 billion acquisition of Activision Blizzard. The deal faced significant delays and required extensive restructuring due to conflicting regulatory decisions across different regions.

Given these hurdles, early and strategic planning is no longer optional - it's essential. Regulators are moving faster than ever, sometimes issuing decisions within just four weeks. Even deals approved under frameworks like the UK's NSI Act are subject to tight deadlines, making immediate compliance a necessity.

Engaging with regulators proactively can make a critical difference. For example, the Competition and Markets Authority (CMA) in the UK actively monitors deal activity through its Merger Intelligence Unit. The CMA frequently sends information requests to parties that haven't voluntarily approached them, and these late-stage interventions can disrupt timelines and create uncertainty for stakeholders.

For growth-stage companies planning exits, the challenges are even greater. Many lack the internal expertise to navigate the complex web of multi-jurisdictional regulations and often underestimate the resources required for full compliance. This is where expert advisory support becomes indispensable. Aligning regulatory strategy with deal design early on ensures smoother execution and minimizes delays.

Phoenix Strategy Group (PSG) has extensive experience managing such complexities. With over 100 completed M&A transactions, their team has a deep understanding of how to anticipate regulatory challenges and structure deals to avoid unnecessary setbacks. As Lauren Nagel, CEO of SpokenLayer, reflected on her experience:

"PSG and David Metzler structured an extraordinary M&A deal during a very chaotic period in our business, and I couldn't be more pleased with our partnership."

Regulatory oversight is only becoming more rigorous. Authorities are introducing new call-in powers, focusing on strategic industries, and exploring emerging theories of harm to address concerns like nascent competition. Companies that treat regulatory complexity as a fundamental part of their business strategy - rather than just a legal box to check - will be better prepared to navigate this evolving landscape.

To succeed in today's M&A environment, regulatory strategy must be woven into the fabric of deal planning from the very beginning. This involves building in ample timeline buffers, preparing for various scenarios, and collaborating with advisors who not only understand the technical requirements but also grasp the broader strategic implications of multi-jurisdictional reviews.

FAQs

How can companies navigate conflicting regulatory requirements in cross-border M&A transactions?

Cross-border M&A transactions often come with a tricky hurdle: navigating conflicting regulatory requirements. Different jurisdictions may have varying merger control laws or approval processes, making it challenging to keep everything aligned. To tackle these issues head-on, companies need to dig deep into due diligence early on. This helps spot potential regulatory conflicts before they become bigger problems.

Bringing in seasoned legal and financial advisors who specialize in international M&A can make a world of difference. Their expertise can simplify compliance efforts and help avoid unnecessary delays. On top of that, maintaining open and clear communication with regulatory authorities in each region, paired with proactive planning, can go a long way in resolving conflicts and keeping the deal on schedule.

How do differences in filing thresholds across jurisdictions affect M&A timelines?

Navigating the filing thresholds for mergers and acquisitions (M&A) across different jurisdictions can be a tricky process. Each country or region sets its own rules about when deals need to be reported, often based on factors like revenue, market share, or the size of the transaction. These variations can slow things down, especially when multiple filings are required in different locations.

To avoid unnecessary delays, companies should prepare in advance by researching the specific requirements for each jurisdiction involved in the deal. Partnering with seasoned advisors who understand global merger control regulations can make the process smoother and help prevent unexpected roadblocks.

Why is early regulatory planning essential for cross-border M&A success?

When it comes to cross-border M&A, tackling regulatory planning early is key to keeping things on track. Merger control rules can differ significantly from one country to another, and these variations often bring surprises that can slow down timelines or even add extra costs.

Starting early allows businesses to spot potential hurdles, stay in step with local regulations, and streamline the approval process. This proactive strategy reduces risks and helps ensure the transaction moves forward without unnecessary hiccups.

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