The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

This blog is a collaboration between Neil Hoolihan, Linklaters in Brussels and Agostino Bignardi, and Anna Mitchell, Linklaters in London.

We have identified five significant developments that financial investors need to be aware of to ensure that their transactions successfully navigate the regulatory risks during the year ahead.

1. Increased disclosure in complex merger control

Merger control authorities in the US and the EU are revising their procedures, streamlining disclosure requirements for non-problematic transactions while requiring greater volumes of information and business documents/data for those transactions with more complex competition issues, which results in lengthier review periods. 

Investors are increasingly likely (depending on the jurisdiction) to be required to disclose information on previous roll-up transactions, portfolio companies’ overlaps, minority investments and the receipt of foreign subsidies. 

Transaction timetables should therefore reflect the increasing time and business resource required to prepare merger control filings.

2. EU Foreign Subsidies Regulation: more filings and scrutiny than expected

The EC has reviewed a higher-than-expected number of M&A transactions (and in June 2024 launched its first in-depth review under the M&A limb) in the first several months under the FSR, reflecting the broad scope of foreign financial contributions caught by the rules. Roughly one-third of pre-notification cases have involved an investment fund. 

Our experience indicates that financial investors can expect detailed information requests regarding their financing sources, relationships between limited partners / different managed funds and portfolio companies. 

Investors should be prepared for this wide-ranging disclosure to avoid extended pre-notification periods (potentially of several months) prior to formal filing. Early engagement with the EC is key to mitigating potential delays. 

3. An increasingly crowded global merger control landscape

Merger control filing obligations in new jurisdictions continue to emerge (e.g. in Asia and Africa). As authorities in these jurisdictions increase their substantive and procedural enforcement (including fines) – even as regards foreign-to-foreign transactions with minimal nexus to the jurisdiction – having a holistic strategy to merger control notifications is increasingly important. 

Whilst submitting a filing can, in theory, provide legal and transaction certainty, such processes take time and can be burdensome (thereby delaying closing)  and, particularly in developing regimes, result in less predictable processes and outcomes. These competing factors will need to be carefully balanced by investors and informed by knowledge of the evolving local regulatory landscape as well as their past and future investment strategy in the jurisdiction. 

4. Enforcement focus on PE investments in the healthcare sector

Recent enforcement action and associated comments by antitrust authorities have signaled skepticism by regulators of private equity’s role in the consumer-facing healthcare sector as well as an appetite to closely scrutinize M&A activity in the sector. 

Despite this, we predict that in many cases authorities’ rhetoric may end up being tougher than their enforcement, and there are strategies to mitigate possible regulatory concerns (e.g. explaining business plans in contrast to “flip-and-strip” and roll-up strategies).

5. The rise of consumer protection enforcement risks 

Given that non-controlling investors can be liable for the actions of a portfolio company, investors must perform due diligence on targets to identify potential risks from the wide-ranging and evolving consumer law from several global regimes.

Of particular relevance, from autumn 2024, the UK will be able to impose fines of up to 10% of global turnover for breaches of consumer protection rules as part of significant reforms to the UK consumer regime. Together with more dawn raids and tougher enforcement action as regards consumer-facing practices and sectors, enforcement risks are increasing considerably.

In summary, the proliferation of parallel reviews and associated heightened scrutiny from the different regulators makes it increasingly imperative to develop a holistic engagement strategy as early as possible.