Mand a toolkit regulation

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Mand a toolkit regulation

  1. 1. M&A TOOLKIT Closing: Regulation© 2007-2013 IESIES Development Ltd. All Ltd. Reserved © 2007-2013 Development Rights All Rights Reserved
  2. 2. There are three different types of regulatory approvals companies need to obtainListed companies(Interest: orderly process and protection of minority investors)UK: Takeover Panel,Hong Kong: SFC Takeover and mergers panelUS: Stock Exchange CommitteeAnti-trust(Interest: prevent monopolistic power; consumer welfare)UK: Monopoly and Mergers CommissionEU: European Competition CommissionUSA: Dept. of Justice and Federal Trade CommissionChina: 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 © 2007-2013 IES Development Ltd. All Rights Reserved
  3. 3. One of the key analyses before starting an offer is whether there will be monopoly issuesANTI-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 © 2007-2013 IES Development Ltd. All Rights Reserved
  4. 4. Anti-monopoly authorities have the power to block deals, or require disposals in order to approve the mergerANTI-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 © 2007-2013 IES Development Ltd. All Rights Reserved
  5. 5. You can improve the odds by developing a lobbying plan for anti-monopoly approvalDEVELOPING 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? © 2007-2013 IES Development Ltd. All Rights Reserved
  6. 6. In China there are fewer precedents and the decision-making is more opaque, making the outcome more unpredcatableANTI-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 © 2007-2013 IES Development Ltd. All Rights Reserved

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