Getting deals through in 2022: new opportunities and risks for companies navigating a complex regulatory environment

Companies can expect tough, complex, and unpredictable merger control processes in 2022, as authorities are under pressure to tackle perceived concerns about overly concentrated markets and previous under-enforcement in particular sectors of the economy.

We continue to see a growing number of active merger control and foreign investment regimes globally, as well as existing regimes which continue to push jurisdictional boundaries. Coupled with that trend, regulators worldwide are also applying increasingly novel theories of harm outside of traditional antitrust analysis, with substantive assessments taking a range of factors – including concerns around access to key upstream inputs, sustainability, and labour markets – into consideration. This reinforces the need for companies to think early about a global regulatory strategy that allows them to manage the complexity and diverging review timelines.

Deal-makers in innovative industries, such as life sciences and tech, must prepare for intense scrutiny, unpredictability and longer review periods

Intervention by at least the US, EU and UK antitrust agencies in deals in innovative industries, in particular in life sciences and tech, vastly exceeds the rates of intervention in any other sector. While authorities are actively cooperating at a policy and case level, deal-makers should nonetheless be prepared for the prospect of divergent outcomes in these high-profile sectors. 

Against this backdrop, deal-makers in 2022 will need to:

• Be ready to engage on complex theories of harm with an increasing focus on vertical and conglomerate concerns on both sides of the Atlantic.
• Prepare for the fact that concerns around nascent/potential competition are no longer a secondary consideration, but a key focus of the substantive analysis. Companies need to be ready to present robust evidence in response to such novel and complex concerns, including on a multitude of possible (hypothetical) markets.
• Assess the risk of a transaction being reviewed even if thresholds are not met, particularly in innovation-heavy markets. This means looking beyond revenue or market share based thresholds when assessing the risk of a transaction being reviewed, in light of the European Commission Article 22 referral policy, and the UK CMA’s expansive approach to jurisdiction under its share of supply test.
• Ensure foreign investment regimes are included as a primary factor in deal planning, including staying informed as to the possibility of new regimes coming into force post-signing (or existing regimes expanding their scope), and providing contractual protection for this scenario.
• Take a holistic and comprehensive approach to any risk assessment considering potential political sensitivities, national security concerns and more active participation from external stakeholders – not just competitors. Politicians and regulators will seek to tread the fine line between promoting innovation and choice, and protecting strategically important businesses and assets.  

The current landscape will present opportunities for deal-makers who are able to present and substantiate a compelling, pro-customer and pro-innovation deal rationale. More than ever, companies need a truly global and well-planned approach to their regulatory clearance strategy, even for prima facie national or regional deals.

We discuss all of these points and more in our twelfth annual overview of what we think the 10 key trends in global antitrust enforcement will be in the year ahead.

Throughout the year, we will hold a number of events to discuss the implications of these and other developments. If you are interested in joining our discussions or hearing more from our global experts on these topics, get in touch with your usual Freshfields adviser.