10 Apr 2016

Merger arbitrage

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Hedge funds and asset managers can stand to make or lose significant amounts of money when investing in companies involved in transactions subject to merger control approval. Antitrust review is a significant risk factor in major M&A transactions.

With more than 125 countries worldwide with merger control regimes, it has become increasingly complex to predict merger control timelines and final outcomes (in particular, whether significant conditions for clearance will be necessary). It can be hard to fully understand and apply the substantive and procedural merger control rules to transactions. This can all strongly affect the returns on arbitrage investments.

By examining a number of important questions, hedge funds and asset managers can gain a significant strategic advantage when making investments (or 'shorting' merging companies' shares), such as: 

  • In which jurisdictions will the transaction likely need to be notified? If notifiable to the European Commission, is there a possibility the deal could be referred back to certain EU Member States?
  • How is the deal likely to be analysed? What are the likely particular concerns? Will the transaction likely be cleared in an initial Phase I, or a subsequent, in-depth Phase II merger review?
  • Will the parties have to offer structural or behavioural remedies to get the deal cleared? Who else can buy those assets?
  • How long will the review process take and will any jurisdiction hold up closing of the deal? What will it mean for the value of investments in those companies?
  • Who can make complaints or submissions to the authorities? What is the likelihood of complainants?
  • Are there any particular policy considerations and / or any parallel antitrust proceedings in the specific sector that might affect the merger control process?

Stephenson Harwood's market-leading, stand-alone competition practice can help you with all of those questions, and more, by providing expert strategic advice. We have experienced competition lawyers active in all economic sectors who have handled cases before both the European Commission and national regulators across the EU and the globe. Where we do not have an office, we have a network of 'best friend' law firms across the world to advise on local law.

In particular, we can help you: 

  • Avoid heavy reliance on biased, speculative or simply incorrect reports and industry reviews on M&A deals.
  • Achieve better investment outcomes (i.e. higher rates of return, both long and short) and avoid costly mistakes, e.g. where investments can go wrong after competition authorities insist on divestments which can change an investment's value proposition.
  • Use merger control as both a sword and a shield (i.e. make complaints and not just respond to information requests).

In addition, we can: 

  • Offer a fast and cost-effective turnaround of advice which is partner-led and an independent voice.
  • Produce practical, tailored and to the point reports at short notice.
  • Where relevant, bring in industry experts from other practice areas and offices across the firm who can provide in-depth commentary on the relevant sector.
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KEY CONTACT

Marta Garcia

Marta Garcia
Partner

T:  +44 20 7809 2141 M:  +44 7985 716 668 Email Marta | Vcard Office:  London

Simon Albert

Simon Albert
Associate

T:  +44 20 7809 2314 M:  +44 78 0810 0882 Email Simon | Vcard Office:  London

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