What is Merger Control?

Merger control is a regulatory process for overseeing proposed mergers and acquisitions to determine if they fall within legal boundaries. Nations may approach this in a variety of ways, but it boils down to reviewing proposed business activities to determine if they would create barriers to competition. If they would, the government may not okay the merger or acquisition, or may do so conditionally, requiring a company to do something like divesting some of its holdings in exchange for regulatory approval.

In merger control proceedings, the companies involved submit information about the transaction to the government. They must provide financial filings with information about market share and impact, as well as their activities in the industry and related matters. The government reviews this information in addition to soliciting public comment and performing its own research. The goal is to estimate the impacts. If a dominant company would emerge or if competition would undergo suppression, it may violate antitrust law.

Companies usually work with special legal advisers while working their way through merger control. Law firms specializing in mergers and acquisitions can help prepare materials and present a compelling case in defense of a planned business activity. Companies usually contract with these firms early, meeting with them to discuss a potential business opportunity at the start to get information about whether it is likely to be acceptable to regulatory officials. This can allow companies to avoid deals the government will not allow to go through before investing time and money.

Rivals can monitor the merger control process and may present material of their own if they fear a merger is likely to cause problems for them. If they can provide documentation showing how the planned transaction will suppress competition or allow a company to become dominant, the government must weigh this information when deciding whether to authorize the merger. These companies may retain law firms of their own to argue their cases.

Merger control can take weeks or months. Financial publications usually follow the process with interest, as it may provide information about the stance regulators are taking on mergers and acquisitions in general. Being able to jump to take advantage of changes in the value of companies is also very important. A merger can be a windfall or a lost opportunity for investors, depending on how quickly they can respond to shifts in fortunes. If the deal is not approved or falls through after merger control, it may result in market upheaval if the companies involved are large.