Merger Clearance Process Gorrissen Federspiel | 2019 the Information in This Publication Is Not and Cannot Replace Legal Advice

Merger Clearance Process Gorrissen Federspiel | 2019 The information in this publication is not and cannot replace legal advice. Gorrissen Federspiel is not liable for any damage or loss directly or indirectly resulting from the use of this publication. Merger Clearance Process Gorrissen Federspiel | 2019 Contact

Martin André Dittmer Managing Partner D +45 33 41 41 43 | M +45 24 28 68 27 [email protected]

Michael Meyer Partner D +45 86 20 74 11 | M +45 40 19 91 57 [email protected]

Erik Kjær-Hansen Partner D +45 33 41 41 36 | M +45 30 18 87 27 [email protected]

Kristian Helge Andersen Senior Legal Counsel D +45 33 41 43 30 | M +45 24 28 68 29 [email protected]

Erik Molin Chief Economist D +45 33 41 43 38 | M +45 27 80 40 77 [email protected] Introduction

Gorrissen Federspiel has the leading Danish competition law practice with comprehensive experience in advising and representing clients during merger clearance processes. Our merger clearance team includes both legal and economic experts who have extensive experience from both national and international cases and with immeasurable experience from working at competition authorities. We take great pride in representing our clients and ensuring that their process with relevant competition authorities, including the European Commission, is carried out as smoothly as possible. If the transaction is subject to approval by one or more competition authorities – which is the case if it constitutes a “merger” and certain thresholds are met – efficient teamwork and communication between the merging parties and the competition law specialists are key to the merger clearance process. The purpose of this folder is to give an executive understanding of the merger clearance process as well as the terminology used. The focus is on the Danish merger control rules and the terminology as it is used by the Danish Competition and Consumer Authority (“DCCA”), although this is generally similar to the terminology used by other competition authorities, including the European Commission. Words highlighted in bold are explained in further detail from page 20 onwards.

Copenhagen and Aarhus, 2019 Gorrissen Federspiel

3 1. Stages of the Merger Clearance Process

4 A Management decision to commence transaction

B Merger screening

C Substantive assesment

Stages of the D Pre-notification period Merger E Notification period Clearance F Post-clearance guidance Process

5 A Management decision to commence transaction

6 Value contribution by Gorrissen Federspiel Ensuring that the final management decision and related documents do not include material or wording that could potentially add unnecessary complexity to the merger clearance process.

Possible stages of the management decision

Your company Gorrissen Federspiel

Management Initial thought of business expansion

Pre-merger seminar with guidance and in- decision to formation on focus areas in the pre-merger phase including the standstill obligation, the potential obligation to submit internal documents, conduct between signing and closing, and commence information exchange

Drafting documents related to the merger transaction business case

Review of drafted management recommendation document

Management decision (may await the outcome of stage B and C)

Competition law due diligence and potential collection of materials related to synergy effects

7 B Merger screening

8 Value contribution by Gorrissen Federspiel Providing a complete overview of relevant jurisdictions where the merger is subject to notification and notification strategy for each jurisdiction, e.g. filing of a standard or simplified notification.

Possible stages of the merger screening

Your company Gorrissen Federspiel

Merger screening questionnaire to obtain Merger geographical turnover split screening Data is provided to Gorrissen Federspiel for the purposes of the merger screening

Decision on limited or full merger screening

Merger screening

Recommendation and filing strategies for the relevant jurisdictions, e.g. filing with the European Commission, standard or simplified notification, etc.

9 C Substantive assessment

10 Value contribution by Gorrissen Federspiel Providing an assessment of whether the merger will be approved, approved subject to commitments, or prohibited, as well as relevant guidance on what commitments to offer to obtain an approval.

Possible stages of the substantive assessment

Your company Gorrissen Federspiel

Providing further data, depending on the specific Substantive case, in order to identify relevant/affected markets assessment

Draft substantive assessment of the merger based on the data provided, i.e. preliminary identification of horizontal/vertical overlaps and the merging parties’ market shares

Providing further data or suggesting amendments to the draft assessment

Final substantive assessment of the merger (this can be done prior to stage B making the assessment part of the final management decision on whether to proceed with the merger)

11 D Pre-notification period

12 Value contribution by Gorrissen Federspiel Ensuring pre-notification contact with the DCCA in order to provide the correct information in the merger notification.

Possible stages of the pre-notification period

Your company and The DCCA Gorrissen Federspiel

Meeting(s) to collect data for the notification Pre-notification and decide strategy period First draft notification

Pre-notification meeting(s) either by telephone or in person

Draft notification is sent to the DCCA

Dialogue, questions and answers to the DCCA

Dialogue, additional meetings, either by telephone or in person

Final merger notification is filed with the DCCA

13 E Notification period

14 Value contribution by Gorrissen Federspiel Ensuring that the companies are aware of the rules relating to pre-clearance behaviour, e.g. the standstill obligation. Communication with the DCCA to ensure a smooth process.

Possible stages of the notification period

Your company and The DCCA Gorrissen Federspiel Notification Additional dialogue/questions Additional dialogue/questions (both before and after notification is complete) period Phase I Consultation of third parties regarding the merger (more dialogue based on their comments) and deciding whether a simplified procedure is possible

Continuing communication with the DCCA

Guidance on pre-clearance conduct, e.g. the standstill obligation

Approval or initiation of Phase II investigation (issues preliminary statement of concerns)

Phase II Further market investigations

Additional information for defining relevant markets

Dialogue on commitments or conditions for approval (note that time limits apply)

15 E+F Notification period + Post-clearance guidance

16 Value contribution by Gorrissen Federspiel Ensuring communication with the DCCA regarding information revealed in the decision and in press releases. Ensuring compliance with commitments in connection with the merger clearance.

Possible stages of the notification period and post-clearance guidance

Your company and The DCCA Gorrissen Federspiel

Stage E Notification Draft decision is provided to the parties period Review of draft decision to prevent publication of confidential information and substantive assessment to ensure correctness + Final decision is published Post-clearance guidance Stage F Guidance on press releases regarding the merger

Assistance on compliance with potential commitments made to the DCCA

17 2. Merger clearance terminology

18 Affected markets The relevant markets are affected if the merging parties have a combined market share of: –– 15 pct. or more where they overlap horizontally; or –– 25 pct. or more if they overlap vertically.

Change of control The term ”control” covers all types of control irrespective of whether it is obtained directly, indirectly, de jure (e.g. by acquisition of shares) or de facto (e.g. by dispersion of shares) and covers both sole control and joint control. The deciding factor is that the transaction entails a change of control on a Merger lasting basis. clearance Commitments If the DCCA finds that the merger will significantly impede effective competition, they cannot approve the merger unless the merging parties propose commitments in order to remedy the identified concerns. terminology The procedure and nature of the commitments will depend on the parti- cular case. Commitments may be structural or behavioural.

Final vs. complete merger notification Once the final notification has been submitted, the DCCA will assess whether they view the notification as complete. If a simplified notification is submitted, the DCCA has 10 weekdays to declare the notification complete, whereas the DCCA can extend the 10 weekdays by reque- sting additional information if a standard notification is submitted. The standard notification will then be complete from the day on which the DCCA receives the requested information. Once the notification is complete, the time-limits start running.

19 Horizontal and vertical overlaps Horizontal overlaps occur when the merging parties operate on the same market, and thus are competitors on this market. Vertical overlaps occur when the merging parties operate at different levels of the supply chain, e.g. when a manufacturer of a certain product merges with one of its actual or potential distributors.

Internal documents Depending on the form of notification, the parties may be required to submit analyses, reports, board minutes, emails, and other internal documents related to the merger. See standard or simplified notification.

Market share The merging parties’ market shares are calculated as their turnover share (in value and volume) of the total market size (in value and volume) on the relevant markets. The total market size is often based on publicly available information such as market investigations as well as the merging parties’ knowledge about the market.

Merger In competition law the term “merger” covers all transactions where a change of control occurs on a lasting basis, namely: –– two or more previously independent undertakings (or parts of them) merge, –– one or more persons, who already control at least one undertaking, or one or more undertakings acquire direct or indirect control over one or more undertakings, either by purchase of securities or assets, by contract or by any other means, –– a full-function joint venture is established.

20 Merger screening The objective of the merger screening is to determine if the merger is notifiable in any jurisdictions that have merger control. The merger is screened under the different jurisdictional thresholds. Thresholds typically focus on the parties’ turnover, assets, market shares, or other criteria.

Merging parties When referring to the “merging parties” (the terminology may vary in practice, e.g. the “notifying parties”, etc.), this normally means the target (i.e. the target company and its subsidiaries or the assets) and the entire buyer group, i.e.: –– the undertaking concerned (buyer); and –– buyer’s subsidiaries and other companies which buyer directly or indirectly controls (e.g. joint ventures); –– buyer’s sister companies; –– buyer’s parent companies.

Phase I Phase I consists of up to 25 weekdays and commences when (i) the notification is complete and (ii) the DCCA has received documentation of payment of the filing fee. Both conditions must be met. If the DCCA finds that the merger will not significantly impede effective competition, the merger will be approved in Phase I. If the merging parties propose commitments in Phase I, the deadline may be extended to 35 weekdays. The DCCA may temporarily stop the clock if it has requested further information, but the parties have not submitted this in due time.

21 Phase II If the DCCA finds, during Phase I, that further in-depth investigations are necessary, the merger will be subject to a Phase II investigation. Phase II consists of up to 90 weekdays. This time-limit is extended by 20 weekdays if the parties submit commitments 70 weekdays or more into Phase II. Commitments must be offered within 90 weekdays. The time-limit may be further extended by up to 20 weekdays if the merging parties agree to this. Consequently, in total, Phase II might consist of up to 130 weekdays. If no decision is reached before the relevant deadlines, the merger will be considered as approved; however, this has never happened in practice. The DCCA may temporarily stop the clock if it has requested further information, but the parties have not submitted this in due time.

Preliminary statement of concerns If the DCCA initiates a Phase II investigation, they are required to is- sue a preliminary statement of concerns, which will state which competition concerns the merger is expected to give rise to. The preliminary statement will be followed up by a state of play meeting between the DCCA and the merging parties, where the merging parties can comment on the concerns stated by the DCCA. The purpose of the preliminary statement of concerns is to inform the merging parties as well as to enable them to contemplate commitments in order to address the concerns.

Pre-notification It is recommended to inform the DCCA of the merger before a final merger notification is submitted. This allows the merging parties and the DCCA to have informal and confidential discussions and it gives the merging parties an indication of how the DCCA views the merger and which possible concerns the DCCA may have. It also increases the chance of an expedited assessment of the merger once the time-limits start running.

22 Relevant markets To identify the relevant markets, both product and geographic markets must be defined. A product market comprises all products/services which are substitutable – either from the demand side or supply side, whereas a geographic market comprises the area in which the conditions of competition are sufficiently homogeneous.

Simplified procedure Even when filing a standard notification, the DCCA can follow a simplified procedure, if the merger can be cleared on the basis of the information available to the DCCA. It is at the DCCA’s discretion to decide whether the submitted information is sufficient for them to review the merger or if further information is required.

Standard or simplified notification The most notable differences between the two filing forms are: –– in a standard notification, only the affected markets must be disclosed, whereas all relevant markets (whether affected or not) must be disclosed in a simplified notification, –– the filing fee for a standard notification is 0.015 pct. of the merging parties’ aggregated turnover in Denmark for the previous financial year (with a maximum of DKK 1.5 million), whereas it is DKK 50,000 for a simplified notification, –– both filing forms require information about the markets, merging parties, etc., but the standard notification requires more detailed information than the simplified notification, e.g. information regarding the structure of supply and demand, trading conditions, access (barriers) to the markets, etc., –– due to the basis on which a simplified notification is assessed (as a gen- eral rule, it is based solely on the information provided by the merging parties), it is easier for the DCCA to withdraw their approval of a simplified notification rather than a standard notification if it turns out the information given was incorrect, incomplete, or misleading, –– in a standard notification, the parties are required to submit internal documents related to the merger.

23 Standstill obligation A merger may not be implemented (the transaction closed in whole or in part) before receiving clearance from the DCCA. Pre-implementation of the merger is subject to penalties and the merging parties should therefore be very cautious to avoid pre- implementation prior to clearance.

Thresholds The thresholds vary substantially in the different jurisdictions. Some jurisdictions take the merging parties’ turnover into account, whereas other jurisdictions focus on assets, market shares, legal presence, or the transaction value. In some jurisdictions filing is voluntary even if the thresholds are met whereas in other jurisdictions, the competition authority may review the transaction even if the thresholds are not met. In Denmark a merger must be notified to the DCCA if: –– the aggregate annual turnover in Denmark of all undertakings involved is at least DKK 900 million and the aggregate annual turnover in Denmark of each of at least two of the undertakings concerned is at least DKK 100 million; or –– the aggregate annual turnover in Denmark of at least one of the undertakings involved is at least DKK 3.8 billion and the aggregate annual worldwide turnover of at least one of the other undertakings concerned is at least DKK 3.8 billion. Note that there are specific rules regarding transactions between parties in the telecommunication sector.

24 Turnover The relevant turnover comprises the merging parties’ net turnover derived from sale of products/services falling within its ordinary activities in the preceding financial year (based on the latest audited accounts). Rebates, value added tax, and other taxes directly related to the turnover must be deducted and adjustments must be made for divestitures/ acquisitions from the beginning of the preceding financial year normally up to the signing date and with full-year adjustment. Furthermore, the sale must normally be geographically allocated to the location of the customer at the time of the sale, i.e. sale in and into Den- mark must be included whereas sale out of Denmark must be excluded.

25 3. How to get in touch

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Public parking just next to our offices at: – Silkeborgvej 2, 8000 Aarhus C

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Public parking just next to our offices at: – Silkeborgvej 2, 8000 Aarhus C

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