{"id":10041,"date":"2022-07-03T19:21:18","date_gmt":"2022-07-03T19:21:18","guid":{"rendered":"http:\/\/legalblog.ie\/merger-trigger\/"},"modified":"2022-11-20T21:32:29","modified_gmt":"2022-11-20T21:32:29","slug":"merger-trigger","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/merger-trigger\/","title":{"rendered":"Merger Trigger"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Undertakings_Covered\" title=\"Undertakings Covered\">Undertakings Covered<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Acquisition_of_Control_I\" title=\"Acquisition of Control I\">Acquisition of Control I<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Acquisition_of_Control_II\" title=\"Acquisition of Control II\">Acquisition of Control II<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Joint_Control\" title=\"Joint Control\">Joint Control<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Joint_Venture\" title=\"Joint Venture\">Joint Venture<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Full_Function_and_Limited_JVs\" title=\"Full Function and Limited JVs\">Full Function and Limited JVs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#EU_Mergers\" title=\"EU Mergers\">EU Mergers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#EU_Joint_Control\" title=\"EU Joint Control\">EU Joint Control<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Exempt_Mergers\" title=\"Exempt Mergers.\">Exempt Mergers.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Securities_Exemptions_I\" title=\"Securities Exemptions I\">Securities Exemptions I<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Securities_Exemptions_II\" title=\"Securities Exemptions II\">Securities Exemptions II<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/legalblog.ie\/merger-trigger\/#Securities_Holding_Exemptions\" title=\"Securities Holding Exemptions\">Securities Holding Exemptions<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Undertakings_Covered\"><\/span>Undertakings Covered<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Undertakings for the purpose of competition and merger law, cover bodies which are not necessarily profit-making. Provided they operate for gain, they constitute undertakings for the purpose of the legislation.<\/p>\n<p>Many bodies in the public sector will be undertakings. Certain activities which appear to have minimal commercial aspects may be deemed to be undertakings.<\/p>\n<p>Public bodies which are engaged in regulatory and administrative functions only are not undertakings under the legislation. Accordingly, government departments and regulatory agencies which do not operate for gain are unlikely to be undertakings.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Acquisition_of_Control_I\"><\/span>Acquisition of Control I<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The criteria for determining whether mergers legislation applies, is the acquisition of control.\u00a0 Control may take a number of forms.\u00a0 It may arise through the use of shareholdings or the control of assets.\u00a0 Control may arise by other means, including through various means of effective economic dependence.<\/p>\n<p>Control may be on a contractual or shareholding basis.\u00a0 Control implies management of the resources of the undertaking.\u00a0 A contract must be for an indefinite or at least a prolonged period without the prospect of early termination.<\/p>\n<p>The mergers provision apply to the acquisition of direct or indirect control over the whole or part of one or more undertakings by one or more individuals and other undertakings who control one or more undertakings.<\/p>\n<p>Generally, financial arrangements involving purchase and lease or sale back will not normally constitute a change of control.\u00a0 Most franchise agreements will not give sufficient control to the franchisor over the franchisee\\&#8217;s business.\u00a0 Investment funds may acquire control, notwithstanding that they do not intend to actively trade.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Acquisition_of_Control_II\"><\/span>Acquisition of Control II<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The acquisition of direct or indirect control is covered.\u00a0 The transfer of the goodwill of a business or client base may constitute a transfer of control.\u00a0 The licensing of brands, copyright and goodwill may constitute a change of control.<\/p>\n<p>A change of control may arise by way of outsourcing a service or function.\u00a0 The outsourced service supplier may take over certain activities which were previously provided internally.\u00a0 The Commission has taken the view that if the assets transferred do not allow the development of a market presence and the service is provided to the outsourcing customer exclusively, the arrangement may be viewed as a servicing agreement only.<\/p>\n<p>A merger or acquisition is deemed to take place where one undertaking acquires the assets and goodwill of another or is in a position to replace the transferor in a business that it undertook prior to the transfer. There may be an acquisition of all the business assets or of a substantial part only for this purpose. There may be a transfer of a particular undertaking within the transferor only.<\/p>\n<p>The acquisition of sole control may arise where an entity acquires the majority of the voting rights of a company.\u00a0 However, the particular shareholding structure may be such that the acquisition of the relevant shareholding is not enough to exercise decisive control exclusively.\u00a0 In other cases, the acquisition of much less than the majority of shares may be sufficient.<\/p>\n<p>A change may occur where there has been an increase in shareholding from a minority to a majority holding. Control may be acquired by a minority shareholder on an effective basis.\u00a0 This may arise in particular where the other shareholders are relatively small and may not be present, represented or organised at corporate meetings.<\/p>\n<p>An option to acquire shares will not generally be enough, as it will not generally carry the right to exercise control.\u00a0 In certain circumstances, it may lead to the actual effective exercise of control, in which case, there will be an acquisition or merger. An acquisition of control may take place in a series of linked or related transactions.\u00a0 They may take place in unlinked cumulative transactions.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Joint_Control\"><\/span>Joint Control<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Joint control may arise by way of a legal change, such as the acquisition of shares, assets or undertaking. It may arise on an effective basis, where entities acquire the ability to exercise decisive influence over a business.\u00a0 Joint control may arise through a joint venture or other shareholder\u2019s agreement or arrangement.<\/p>\n<p>Joint control may be by way of a positive right or a right of veto.\u00a0 A power of veto may be sufficient to give control in some circumstances.\u00a0 A decisive influence may be exercised by the acquisition of a minority shareholding, together with rights which give powers of veto and indirect control.\u00a0 Control may arise through rights to appoint senior management and directors.\u00a0 It will depend on the overall context as to whether this is sufficient to constitute the exercise of a dominant influence.<\/p>\n<p>Parties may acquire control jointly, either through a legally binding joint venture or shareholders agreement or on a de facto basis.\u00a0 Joint control may arise where there are strong common interests between minority shareholders. This may arise where there is mutual dependence.\u00a0 Joint control may be based on a common interest or interests.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Joint_Venture\"><\/span>Joint Venture<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The fact that one joint venturer has superior knowledge and the other plays a very modest role only does not preclude the possibility of joint control.\u00a0 Even if one does not play any role in management, its presence may be motivated by long-term financial and strategic considerations.\u00a0 Joint control is less likely where one party has a casting vote or has the ability to have an ultimate say in the decision-making process.<\/p>\n<p>A change in control in respect of a number of entities who act jointly, from joint to exclusive control, is sufficient to be a merger or acquisition.\u00a0 There has been a change in the identity of the party \/parties who may exercise decisive influence.<\/p>\n<p>The change from joint to sole control is sufficient to require a merger notification.\u00a0 The addition of a further shareholder may be notifiable, notwithstanding that the business remains jointly controlled before and afterwards if one or more of the shareholders acquire sole or joint control by reason of the addition.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Full_Function_and_Limited_JVs\"><\/span>Full Function and Limited JVs<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The creation of a joint venture to perform on an indefinite basis, all the functions of an autonomous economic entity is a merger.\u00a0 Cooperative joint ventures are scrutinised under general competition law in relation to anti-competitive practices and abuses of a dominant position.\u00a0 Full-function joint ventures are considered under mergers provisions.<\/p>\n<p>In order to be a full function joint venture, it must have sufficient functions to enable it to operate itself in the relevant market.\u00a0 It must have sufficient management, physical and other resources to undertake the business the subject of the joint venture on an indefinite basis.\u00a0 If it takes over one function only without an independent presence on the market, it is not a full function joint venture.<\/p>\n<p>Joint ventures undertaking production, R&amp;D and other limited functions are not full function joint ventures.\u00a0 Joint ventures which are for the purpose of holding assets or which are created for tax and financial reasons are unlikely to be full function joint ventures.<\/p>\n<p>The fact that sales, particularly in the early phases are to a parent does not necessarily, negate full functionality.\u00a0\u00a0 This may be necessary in a start up in order to establish a joint venture in the market.\u00a0 Full functionality generally requires more than 50% of turnover from third parties in the longer run.<\/p>\n<p>If the entity by itself is set up to play a role in the market and is economically autonomous from an operational perspective, then it is fully functional..\u00a0 In principle, the joint venture must supply goods and services to the entity that is prepared to pay the most in the market. If it does not, \u00a0it will be considered case-by-case, whether it has sufficient functionality and commercial independence.<\/p>\n<p>An outsourcing joint venture which provides services to the establishing undertaking only and is dependent on it for services, it is unlikely to be a full function joint venture.\u00a0 If, however, it is established for the purpose of significant market access, it may be regarded as a full function, provided that significant third-party sales emerge and it deals with its parents on an arms-length basis.<\/p>\n<p>The joint venture should be intended to operate on an indefinite basis.\u00a0 The fact that there may be provision for termination will not necessarily negate this intention provided it is capable of enduring for a sufficiently long period and there is a sufficient prospect of indefinite duration. In contrast, a joint venture for a limited period or a particular project is less likely to constitute a merger. It may raise other competition issues in terms of anti-competitive practices and arrangements and potential abuses of a dominant position.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"EU_Mergers\"><\/span>EU Mergers<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The criteria are similar under the EU mergers legislation.\u00a0 Concentration involves a lasting change in the control of undertakings.\u00a0 A shareholder may gain decisive influence by being able to bring decision-making to a deadlock.\u00a0 This may be sufficient decisive influence.<\/p>\n<p>Generally, more than 50% of voting rights are required in order to obtain decisive influence.\u00a0 Where a shareholder\u2019s agreement provides that key strategy decisions require a certain higher majority, acquisition of the majority shareholding may not suffice to acquire decisive influence.<\/p>\n<p>A change from joint to sole control is deemed a merger because there is a change in the entities which may exercise decisive influence.\u00a0 This may occur where a minority shareholder even if 50% shareholder, acquires complete control. Joint control arises where two or more undertakings have the possibility of exercising decisive influence over an undertaking.\u00a0 It may arise where one entity has the right to veto strategic decisions.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"EU_Joint_Control\"><\/span>EU Joint Control<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Joint controls may exist between two equal joint ventures.\u00a0 There need not necessarily be a formal agreement.\u00a0 Control may also exist where two parties are required to make strategic decisions.\u00a0 A joint interest in effect may be found in effect in a range of circumstances.\u00a0 It may arise from a commonality of interest.\u00a0 There may be no stable majority in the decision-making procedure, in which event, there will not be joint control.\u00a0 A casting vote is generally inconsistent with joint control.\u00a0 The decisive control must be sufficiently enduring.<\/p>\n<p>A change in the nature of control may take place where there ceases to be joint control.\u00a0 This may occur where there is an increase in the number of shareholders, thereby changing the balance of power.\u00a0 Mere changes in the amount of shareholding, without a change of power, will not constitute a change of control. There may be a change in the nature of control if one or more new controlling shareholders enter or there is a reduction in the number of controlling shareholders.<\/p>\n<p>A change from sole to joint control may be notifiable.\u00a0 A change in the identity of one of the joint controllers or the addition of a joint controller may constitute a change in decisive influence and be accordingly notifiable.\u00a0 The entry of new shareholders may amount to a change in decisive control if one or several shareholders acquire sole or joint control by reason of the change in shareholdings.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Exempt_Mergers\"><\/span>Exempt Mergers.<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Certain categories of mergers are exempt from notification, notwithstanding that there is an acquisition of a dominant influence.\u00a0 There is no merger by reason of a receiver or liquidator taking control of a business on enforcement or on formal insolvency.\u00a0 The disposal of the business assets by the liquidator or receiver is subject to merger control.<\/p>\n<p>There is an exemption where control arises from arrangements within groups of companies.\u00a0 There is no merger or acquisition where all of the undertakings involved are directly or indirectly under the control of the same undertaking. The group exemption applies to both direct and indirect control in the above sense.<\/p>\n<p>Similarly, there is an exemption for internal restructuring in the context of the EU Regulation on Merger Control \/ Concentrations.<\/p>\n<p>The transfer of control arising on the death of a business owner, whether under a will, intestacy or by a survivor of a joint tenancy, is not a notifiable merger.<\/p>\n<p>The Irish mergers control legislation does not apply to mergers which are within the scope of the EU Concentrations directive.<\/p>\n<p>There are similar exemptions from the EU Concentrations directive.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Securities_Exemptions_I\"><\/span>Securities Exemptions I<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>There is an exemption for the acquisition by securities-based companies in the course of their business as holders and dealers in securities. This may be for their own account or an account of others. They must be undertaken in the context of that business and be held for a temporary period only.<\/p>\n<p>The acquiring entity must be a credit institution or other financial services institution which carries on this type of activity. The securities must be acquired with a view to resale. Control must not be exercised over the company with a view to determining its strategic commercial behaviour.<\/p>\n<p>Control may be exercised only for the purpose of preparation for a sale or the disposal of its assets or undertaking. There must be a disposal within one year, at least to a level whereby it is no longer in control.<\/p>\n<p>The EU legislation exempts acquisitions of control by receivers and liquidators and equivalent office holders.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Securities_Exemptions_II\"><\/span>Securities Exemptions II<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>There is an exemption where control is acquired by an entity whose business is dealing in securities for its own account or on account of others. The control concerned must be acquired on a temporary basis pending arranging from the disposal, within a period, of all or part of the undertaking or its assets.<\/p>\n<p>It must not be for the purpose of determining the manner in which activities are carried on by the entity concerned.\u00a0 The period is to be less than one year from the date on which control is acquired.\u00a0 Where the undertaking shows that it is not reasonably possible to dispose of the securities or assets concerned within one year, the Authority may allow a longer period of exemption.<\/p>\n<p>The above provision is quite wide in scope. It may be used in the context of a wide variety of holdings. It may be, for example, used by an investment bank which acts in the disposal of securities. It may allow a temporary acquisition through an intermediary without obtaining mergers consent. The requirement for consent will arise on the acquisition from the intermediary.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Securities_Holding_Exemptions\"><\/span>Securities Holding Exemptions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>There are other exemptions for financial holding entities which acquire securities and other interests without indirectly or directly becoming involved in management. It must be possible for a judicial or administrative authority to supervise compliance with these conditions.<\/p>\n<p>Voting rights may be exercised only to maintain the value of the investment. They must not directly or indirectly determine the commercial conduct of the undertaking.<\/p>\n<p>The exemption is limited in scope. It relates to the acquisition of shares and securities only. It does not apply if the transaction is part of a larger arrangement constituting a single merger in its own right, which is not exempted.<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-10041\" data-postid=\"10041\" class=\"themify_builder_content themify_builder_content-10041 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>Undertakings Covered Undertakings for the purpose of competition and merger law, cover bodies which are not necessarily profit-making. Provided they operate for gain, they constitute undertakings for the purpose of the legislation. Many bodies in the public sector will be undertakings. Certain activities which appear to have minimal commercial aspects may be deemed to be [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[157],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/10041"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=10041"}],"version-history":[{"count":7,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/10041\/revisions"}],"predecessor-version":[{"id":20588,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/10041\/revisions\/20588"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=10041"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=10041"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=10041"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}