1. M&A TOOLKIT
Closing:
Regulation
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2. There are three different types of regulatory approvals
companies need to obtain
Listed companies
(Interest: orderly process and protection of minority investors)
UK: Takeover Panel,
Hong Kong: SFC Takeover and mergers panel
US: Stock Exchange Committee
Anti-trust
(Interest: prevent monopolistic power; consumer welfare)
UK: Monopoly and Mergers Commission
EU: European Competition Commission
USA: Dept. of Justice and Federal Trade Commission
China: Ministry of Commerce (MOFCOM), the National Development and Reform Commission
(NDRC) and the State Admin for Industry and Commerce (SAIC)
Political
(Interest: national security)
US: Committee on Foreign Investment in the US (CFIUS)
China: MOFCOM and other ministries; State/Provincial /Local authorities
Generalisation:
•West: Many precedents, rule-based, predictable
•China: Few precedents, relationship-based, uncertain
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3. One of the key analyses before starting an offer is whether there
will be monopoly issues
ANTI-MONOPOLY REGULATION
Purpose: To prevent monopoly power that
destroys economic value in society
Every country has different laws,
but the common test is:
Does the merger increase market share
over 25% (or 20%)?
Key Question: Of what market?
Acquirers argue for widest possible
definition, critics advocate a narrow market
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4. Anti-monopoly authorities have the power to block deals, or
require disposals in order to approve the merger
ANTI-MONOPOLY EXAMPLE
In Guinness/GrandMet merger we argued that the relevant market
was Total Alcoholic Drinks or Total Spirits, since customers’ drinking
repertoire was usually across several categories
FTC decided that the market definition to use
was spirits type - “Scotch whisky and “Gin”;
CONSEQUENCE: The sale of the Dewars and Bombay Sapphire
brands were conditions of approving the merger
Both brands were
bought by Bacardi in
an auction for £1.15
billion
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5. You can improve the odds by developing a lobbying plan for
anti-monopoly approval
DEVELOPING A LOBBYING PLAN
Does the purchase of Huiyuan by Coca-Cola
create monopoly power?
Analysing the deal:
•Who would lobby against this deal? Why?
•What arguments would they use?
•How will you counter their arguments?
•Who might lobby for the deal?
•What arguments can you use?
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6. In China there are fewer precedents and the decision-making is
more opaque, making the outcome more unpredcatable
ANTI-MONOPOLY LAW IN CHINA
China’s anti-monopoly laws have historically been loose
China’s anti-Monopoly law in place August 2008
1. Inbev/AnheuserBusch was first case….allowed - prevented
from ever increasing their stakes in Chinese breweries again
2. Huiyuan/Coca-Cola was second….not allowed - public rationale
was anti-monopoly (ability to exert market power on
retailers/distributors with bundled deals)
3. Yum!/Little Sheep…..allowed - but took 12 months
Anti-monopoly ruling and national interest
seem to be considered together
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