Brexit could make mergers and acquisitions difficult

The departure of the UK from the European Union could create significant problems for Irish companies involved in mergers and acquisitions, according to an expert on EU law.

Since 1990, businesses around the world have benefitted from the EU Merger Control Regulation, which means that deals involving companies with high turnovers in several EU member states are notified just once to the European Commission, instead of having to be notified in several EU member states.

The departure of the UK from the union could see EU turnovers of most Irish companies falling below the threshold that is necessary to gain access to the EU's "one-stop shop" system, according to Vincent Power, partner with A&L Goodbody. "The chances are that the UK turnover of the Irish companies is their biggest, and so they would fall below the EU threshold."

Competition agencies

Deals for such companies would therefore have to be approved by a number of national competition agencies.

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In order to protect against this inconvenience for Irish business, Mr Power said the Irish Government should seek to have the EU reduce its threshold.

Recent examples of Irish-related deals that were handled by the European Commission and did not have to be notified at the member state level include UDG and Celesio, Ryanair and Aer Lingus, and Aer Lingus and IAG.

Mr Power also said that, after Brexit, the commission could still stop mergers involving UK companies if they have sufficient turnover in the EU. The commission blocked the proposed merger between Honeywell and General Electric even though it had been approved in the US.

State aid

He also pointed out that after Brexit businesses in the UK will still be able to complain to the commission about alleged State aid to Irish or any other EU businesses. However the reverse might not be true, and Irish business could find itself unable to complain to the commission about State aid by the UK to its buinesses.

“The Government needs to put the issue of State aid on the agenda,” Mr Power said. While the EU will be anxious that any agreement with the UK would not see it gaining a competitive advantage as a result of leaving the union, a “hard exit” that came about in the absence of any agreement could see the opening up of the state aid issue as a real problem.

He said that the UK’s departure from the EU could unfold in the way of Ireland’s from the British empire, with the departing UK keeping its laws as they were at the time of the break, and then changing them gradually over time.