The UK has avoided adding an extra layer of complexity to M&A transactions after a legal ruling that the Office of Fair Trading can maintain a degree of discretion in assessing proposed deals. The ruling sends a positive signal that the UK is sympathetic to mergers.
Under the country's two-tier merger investigation process, the OFT refers proposed deals to the Competition Commission when it feels that those deals could damage the competitive position of rival firms. Of the 414 cases it examined in 2002 to 2003, 21 were referred.
Companies and their bankers are generally keen to avoid having their cases referred as this can add complexity, time and expense to the merger process.
The new ruling from the Court of Appeal arose after IBA Healthcare, a company that supplies software and systems to the healthcare market, complained that in November 2003 the OFT had decided not to refer a merger between two similar companies, iSoft and Torex, to the Competition Commission.
Later that month, IBA appealed to the Competition Appeal Tribunal (CAT) to review the OFT's decision. The CAT overturned the OFT's decision, and ordered it to reassess it, raising the possibility that the OFT would lose much of the discretion it uses in reviewing mergers.