MERGERS and acquisition activity was down 33 per cent in 2009 compared to the year before, but things could be changing in 2010. A survey by the Association for Corporate Growth and Thomson Reuters has found that M&A professionals are optimistic about a pickup of M&A in the next six months. This is heartening news, which suggests that companies are no longer hunkering down to weather the recession, but looking to move forward. But will regulatory hurdles, particularly in Europe, pose a threat to high profile mergers in 2010? We have just seen the initial antitrust review of Kraft’s bid for Cadbury – quite a straightforward deal in antitrust terms – extended by the EU until the start of 2010 (although clearance is likely to be given in January.) More dramatic is the proposed takeover of Sun Microsystems by Oracle, which has suffered a long delay in completion due to the EU’s antitrust concerns.
Former EU Competition Commissioner Neelie Kroes said last March that the EU does not plan to loosen its strict antitrust rules despite the recession. In January Kroes will be replaced by Joaquín Almunia, and this change of personnel in the top job is unlikely to lead to a relaxation in its outlook. Almunia has previously suggested that he is likely to be a supporter of regulatory intervention.
For example, in an editorial for the Wall Street Journal he wrote: “What remained of the Reagan and Thatcher ideological heritage – the aversion to any attempt to correct the undesirable effects of the ‘laissez-faire, laissez-allez’ approach – has collapsed. The period we are entering will be characterized by a more active involvement of the public sector in the economy”.
Some big deals are coming before the EU in early 2010, such as British Airways/Iberia, and networking giant Cisco’s proposed acquisition of videoconferencing supplier Tandberg. This is currently undergoing antitrust review by the US authorities, who recently requested further information from Cisco prior to granting approval.
A battle between Cisco and the EU is not likely, but on the other hand certain areas of the combined Cisco/Tandberg may result in a close antitrust scrutiny. Hopefully the EU will not subject the deal to long delays.
Almunia is an economist by training, so hopefully he will understand the benefit of speeding along the antitrust process. This week’s timely clarification the EU’s approach on Oracle/Sun is a great step in the right direction.
Maria De Heaver is founder of Merger Antitrust Review, a consultancy dedicated to advising institutional investors on the antitrust risks of mergers and acquisitions