On 4 October 2024, South Africa’s Competition Commission published a guideline on its approach to evaluating whether two or more transactions can be filed with the Commission under a single merger notification in terms of the Competition Act of 1998. Alchemy partner, Leana Engelbrecht, sheds light on this new guideline and its positive implications.
It often transpires that parties enter into complex commercial agreements when acquiring control over another company. For example, where shares in a target company are acquired in phases over time or several inter-conditional transactions are concluded to give effect to a transaction involving various group companies.
Where these transactions are indivisible, and would not be carried out without the other, the various component parts of the transaction can be notified to the competition authorities in one merger notification.
This approach makes sense because indivisible transactions will likely have the same impact on competition and the public interest and separate notifications would entail an unnecessary duplication of efforts. The Competition Tribunal has also confirmed that the merging parties should not be unduly burdened with duplicated notifications in these circumstances and, of course, a duplication of the significant merger filing fees paid for the notification of a merger, is a clear example of such a burden on the merging parties.
The collective assessment of inter-related and inter-conditional transactions has developed over time and the Competition Tribunal has collectively assessed transactions that: (i) involved different transactions, all recorded in separate transaction agreements; (ii) agreements that were not implemented simultaneously; (iii) entailed the acquisitions of an initial minority interest and a subsequent majority interest; and (iv) were informed by the same rationale.
However, there are no express criteria to determine whether transactions are indivisible for merger assessment purposes. As such, the approach to the collective assessment of decisions is largely based on factual considerations related to the particular transactions to determine whether they are interdependent and interrelated. The Commission has itself acknowledged that transactions that are interdependent and indivisible (and not strictly only inter-conditional) may be considered as indivisible for merger assessment purposes.
In response, the Commission has now published guidelines that seek to provide guidance on its views on this issue and specifically list the factors that will be considered when determining whether multiple transactions are indivisible and can be notified and assessed under a single merger filing.
The Commission will assess the relationship between related transactions from a factual or legal perspective to answer the central question of whether the transactions would not be implemented without the other.
In terms of the guideline, the Commission will consider the following non-exhaustive list of factors:
- The manner in which the transaction is structured
- The relationship between the transactions
- The interdependence of the transactions (whether one transaction could be carried out without the other transactions)
- The rationale underlying the multiple transactions
- Whether the transactions will be implemented simultaneously under same agreement
- Whether there are multiple acquiring firms, under common shareholding, acquiring the same target firm(s)
- Whether there are multiple target firms with common shareholders/sellers and common acquiring firms
- Whether there are multiple acquiring firms in terms of a single agreement pertaining to the same target firm (for example, property transactions and consortium arrangements)
- Whether the transactions involve a similar competitive and public interest assessment and whether similar conditions are likely to be applicable to the transactions
- Whether the single notification is aimed at circumventing the applicable filing fees.
The guidelines are useful for ensuring that merging parties are aligned with and provide sufficient information to the Commission for the assessment of transactions in a single filing – something that the Commission considers early on in its assessment of all mergers comprising multiple transactions. And, most importantly, they serve as a clear reminder to practitioners to ensure that these issues are properly considered when the transactions are being negotiated as the contractually agreed relationship between the transactions will determine whether a single or multiple notifications to the Competition authorities will be required.