From a global perspective 2021 was a record year for mergers and acquisitions. Various indicators seem to suggest that Malta is going in the same direction, and is being driven mainly by the economic conditions being experienced locally, as well as within the Eurozone.
There is no doubt that such a high volume of merger and acquisition transactions may help to expand markets and bring benefits to the economy. That said, given that Malta is small, the risk of falling foul of competition law is greater than elsewhere.
On the one hand, a well concluded merger or acquisition transaction should result in better economies of scale, enhanced profitability as well as a stronger position in the market for the parties concerned. On the other side of the coin, such transactions may also restrict competition in the Maltese market to the detriment of consumers.
Given the rapid pace at which most of these transactions would need to be concluded, it might be easy to overlook the relevant merger control and competition law considerations. Nevertheless, it is imperative that one duly and timely considers the existence of a possible concentration and analyses whether such a transaction needs to be pre-cleared by the Office for Competition in Malta.
But what is a “concentration”?
The Control of Concentrations Regulations (SL 379.08 of the Laws of Malta) (the Regulations), which constitute the principal legislation governing merger control, defines a “concentration” as any of the following transactions, whether occurring in Malta or elsewhere, but excludes intra-group transactions:
a merger between two or more undertakings that were previously independent from each other; or
the acquisition by one or more undertakings or by one or more persons already controlling at least one undertaking, whether by purchase of securities or assets; or
the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity.
In addition, a “concentration” would arise when in the preceding financial year, the aggregate turnover in Malta of the undertakings concerned exceeded €2,329,373.40 and each undertaking had a turnover in Malta equivalent to at least 10% of that combined aggregate turnover.
What are the implications?
Transactions that fall within the scope of the definition of “concentration” would need to be notified to the Office for Competition in Malta prior to the transaction being implemented or concluded and if an agreement is entered into between the parties (such as a Memorandum of Understanding), within 15 working days from signing of such agreement.
Notification should be carried out by completing the Form CN and in certain cases, the parties may benefit from a simplified notification process.
In this regard, the Regulations allow either a 6-week or a 4-week period (depending on whether the concentration is being notified via the simplified notification process or standard process) within which the Office for Competition in Malta should examine the notification and determine whether the concentration is compatible with the Maltese market or otherwise. If the conclusion is that the concentration would lead to a substantial lessening of competition, then the Director General for Competition would oppose the concentration, resulting in the merger or acquisition transaction being prohibited from being concluded.
What happens if one forgets to notify the Office for Competition of a concentration?
The Office for Competition in Malta may adopt certain administrative procedures if it becomes aware of a completed acquisition or merger transaction which is found to be in breach of the Regulations. In this regard, the Office may request divestment and/or impose penalties on the parties.
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Our Firm is well placed to assist you and your organisation with all the advice you may require throughout the various stages of a merger and acquisition transaction.
Should you require further information or any assistance in this regard, please do not hesitate to contact us.
This document does not purport to give any legal, financial or tax advice.
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