Conclusion of fintech deals in Great Britain involves participation of a large number of consumers & innovative firms. Over the recent years, UK fintech regulators have tightened control over this sector, justifying it by the need to develop more effective M&A control mechanisms.
Digital Markets Regulation
In the quickly evolving digital marketplace, the effectiveness of control over M&A deals in the UK fintech sector is of paramount importance. Given the need for more scrupulous analysis of fintech deals, government authorities, including the CMA, are expected to thoroughly examine technical transactions, including fintech ones.
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The British government has recently come up with recommendations on M&A deals in the UK fintech sector, including the creation of a DMTF. In its turn, the CMA has made it clear that strict compliance with technical agreements is absolutely necessary for all market players. The regulator is planning to take an even tougher stance toward M&A deals to regain control over the majority of fintech transactions after Brexit.
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CMA to Become More Interventionist
CMA has become noticeably more involved in mergers over the recent years. In particular, it has created a team responsible for identifying recently completed transactions it may be interested in. However, it is the organization’s policy to intervene only when problems are identified or when complaints from 3rd parties are received. The CMA has also announced its plans to control foreign investment in critical UK infrastructure.
What Types of Transactions Require Obtaining Permission?
Control over M&A deals in a time of economic hardship includes:
- acquisition of control over businesses
- registration of specialized funds in Great Britain
- exchange of debt for shares, if purchasing shares of a British company provides the purchaser with a right to control the company’s strategy & activities
Structure of M&A Deals in Great Britain
M&A deals in Great Britain may involve the acquisition of one of three alternative levels of “control”:
- legal control (acquisition of a controlling stake in a British company)
- actual control (the ability to control a company’s policy)
- significant impact (making an impact on strategic business decisions)
Regulation of M&A Deals in Great Britain
After Great Britain left the EU, the EUMR has continued to be in effect in the country. However, the EUMR is mandatory only in cases where the turnover of companies participating in a transaction exceeds certain values. Monitoring mergers in Great Britain is a two-stage process, involving initial & in-depth review. Both stages are implemented by the CMA.
It is worth remembering that acquiring a British company whose shares are listed on a stock exchange requires compliance with the Code of Acquisition.
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Assessing M&A Deals During the Coronavirus Pandemic
In its recently published guide, the CMA emphasizes that its approach to the assessment of M&A deals and its research standards remain unchanged. However, the regulator does recognize the significant impact that COVID19 is exerting on the market:
Given that, the CMA will not be taking punitive actions against companies that have failed to provide required statutory information by a specific deadline. According to the CMA, deadlines applicable to its operation remain unchanged, but notifying parties in advance will will take longer because of the problems involved in obtaining information from individuals involved in M&A transactions.
The CMA is currently advising companies to postpone submitting applications & conduct meetings remotely. It will be continuing to introduce interim measures & analyze any changes caused by COVID-19 on a case by case basis.
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Importance of Internal Documents
The CMA emphasized the importance of internal documents which is why it will be carefully evaluating them to determine plans for future growth.
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Merger control in Great Britain provides an opportunity to apply some of the new proposals & determine the effectiveness of the competition regime. Advanced verification mechanisms also minimize the risk of violations during enforcement.