Safe through the deal despite COVID-19
The COVID-19 pandemic poses special challenges to companies in transactional projects in carrying out required merger control procedures. At the same time, the relevance of foreign trade approval procedures and restrictive government measures is increasing for investments by foreign companies. We present below the most important steps to bring your transaction to a successful conclusion even during this time.
1. antitrust law/merger control
Antitrust support for a deal can take many months and tie up considerable resources (especially staff). Even one COVID-19 case in your company can slow down required merger control proceedings before antitrust authorities tremendously if a key person becomes ill or is quarantined. Face-to-face meetings are no longer possible, schedules get mixed up and deadlines threaten to slip by. Without preparation, you run the risk of not being able to counteract in time.
Delays may also occur with the relevant antitrust authorities. After initial conversion difficulties, many antitrust authorities have adapted to the new situation for the time being and are conducting merger control proceedings within the statutory decision deadlines, including the German Federal Cartel Office and the European Commission. Internationally, there is an increasing move to electronic transmission of required documents. In some countries, however, procedures or deadlines are temporarily suspended.
What can you do now?
- Check the latest notifications from the relevant antitrust authorities. If possible, you should register transactions as soon as possible: The EU and many countries allow registration (significantly) before signing. The earlier you sign up, the more time and flexibility you have in the transaction process until signing and closing to respond to sudden obstacles. Remember, however, that – depending on the country – the transaction may become public knowledge through a notification or clearance by the antitrust authority. Therefore, check the relevant regulations on procedures, timing and publicity to avoid that the deal becomes public too early with regard to your strategy and legal framework (in particular other reporting and publication requirements).
- Identify early on the staff required for the deal and the merger control process. If possible, ensure they are mobile/out-of-office and available in case questions arise during the enrollment and approval process. Develop contingency and substitution plans as early as possible.
- Manage the collection of necessary information and documents at an early stage: The preparation and implementation of merger control proceedings regularly involves the compilation and preparation of a large amount of information and documents. At the same time, it can happen at any time that the employees essential to the deal suddenly have to work from home or are completely absent. Therefore, start collecting and providing the necessary information and documents as early as possible. Start with the documents that you can’t (yet) access electronically or that are difficult to access. The same applies to documents for which – depending on the relevant legal system – special formal requirements apply (originals, certified copies, apostilles, etc.) or which can only be prepared by certain persons (e.g. documents with signatures of company officers). Ensure that required records and information are captured electronically to the greatest extent possible so that they can be accessed remotely and by substitutes of ill/absent employees.
- Incidentally, use IT solutions as well: To the extent that face-to-face meetings with antitrust authorities or antitrust counsel are not possible, use collaboration platforms and video conferencing so that work can continue even when employees are not on site. Make sure your employees are familiar with how to use the IT infrastructure in the home office.
2. investment control under foreign trade law
In the case of investments by foreign companies, the relevance of foreign trade law audits and approval procedures is increasing. In a communication dated March 25, 2020, the European Commission called on member states to apply national foreign trade law investment control mechanisms more strictly. The Commission is responding to the economic developments triggered by COVID-19 and the risk that companies in strategically important areas will come under the control of non-European
investors reach.
Member States are encouraged to make full use of all the tools at their disposal to screen and prevent investments from non-EU countries that could threaten Europe’s security or public order. Currently, 14 member states have corresponding national rules and procedures. The remaining member states were called upon to create such in the short term and in the meantime to fall back on legal options already in force.
Of particular relevance here is EU Regulation 2019/452 establishing a framework for the verification of foreign direct investment. While it does not enter into force until October 11, 2020, member states are encouraged to apply their existing review regimes in light of the regulation. Where such review regimes do not (yet) exist, a transaction may be reviewed by the Commission and member states within 15 months of its consummation.
For example, a transaction completed in March 2020 may be reviewed retrospectively in the period between October 11, 2020 to June 2021. The result may be subsequent restrictive government orders and actions.
What can you do now?
- Check at an early stage whether and in which countries the transaction falls within the scope of a foreign trade law audit, corresponding approval procedures or an ex-post control. In cases of doubt, consider (informal) consultations with the respective authorities.
- Registration and approval procedures under foreign trade law can also take up considerable time and tie up resources. Here, too, you should therefore, and if possible, notify transactions as soon as possible and, incidentally, observe and implement the guidance given above for the area of merger control accordingly.
3. our consulting services
KPMG Law advises on M&A transactions on all issues of antitrust and merger control law as well as foreign economic review of foreign investments. We represent you in the necessary proceedings before authorities and courts. Through our global network, we provide you with our services “from a single source” even for international transactions and procedures.
