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Financial and strategic implications of mergers and acquisitions

4.2 Regulation of mergers and acquisitions

During a takeover, it is important that the companies comply with relevant legislation
and regulations.

The role of the competition authorities varies from country to
country but as a general rule their aims are:

 To strengthen competition

 To prevent or reduce anti-competitive activities – In many countries, anti-
competitive is deemed to be the creation of a new entity that will have 25%
or more of the share of a market

 To consider the public interest – factors such as:

– national security (including security of energy and food supplies)

– media quality
– financial stability (e.g. protecting the stability of banks and financial
services).

If the competition authorities find that a proposed merger or takeover is anti-
competitive, they have the power to block the takeover completely, or to allow it to
proceed subject to certain conditions being met. For example the combined entity
might be required to sell off some of its retail outlets after the acquisition.

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