Takeover Talks: The Times They Are A-Changin'

Harry Thimont: Hello and welcome to our sixth podcasts in our series on UK Public M&A, and our first one in the combination of Ashurst and Perkins Coie. My name is Harry Thimont and I'm a partner in the corporate practice here at Ashurst Perkins Coie. Today, I'm delighted to say that I'm joined by Hayley Gow, who's new to the podcast and a fellow partner in the corporate practice, and also by Chris Eberhardt, partner in our antitrust and competition practice who has the misfortune of regularly working alongside me and Hayley on M&A transactions. In addition to merger clearances, Chris also handles competition investigations, consumer protection matters across the UK and EU. So, we're very lucky to have him with us today.

To set the scene briefly, as our listeners will be aware, M&A transactions have become increasingly complex over the past decade in a number of ways. Regulatory conditions in particular have become more prevalent and introduce additional execution risk. In UK public M&A, it now takes on average around 100 days to get from a firm offer announcement to completion. But notably, for transactions valued at over one billion sterling, this period almost doubles. So, I'm very keen to get Chris's thoughts on how the regulatory landscape has evolved and how this is impacting UK public M&A.

So, starting close to home, the CMA introduced a new framework at the back end of 2024. Perhaps, Chris, you could start by reminding us what the framework is, specifically what the four Ps are, and how they have impacted M&A in the last 18 or so months.

Chris Eberhardt: Sure. Thanks Harry, and thanks to you and Hayley for inviting me to join you today. So, I mean, I think, if you've been following competition laws to any degree in the last 18 months, you've likely have heard about the four Ps. These essentially were a new framework that the CEO of the CMA, Sarah Cardell, introduced in late 2024. The four Ps are pace, predictability, proportionality and process. And essentially, these are now the principles which the CMA uses to underline how it's going to operate across its functions, but they have certainly had a significant impact on deal making. And the four Ps really were a response to growing pressure at the time from government for the CMA to be much more targeted, much more proportionate in its interventions, including in respect of transactions and merger control.

So, if we start with the first one, pace. The CMA essentially committed to acting more swiftly and delivering more timely outcomes and, in practical terms, that has meant shorter target timelines. So, the pre-notification phase, which had been averaging around 65 working days in recent years, but in many cases can be much longer than that, now has a target of 40 working days, which starts once the requirements to commence pre-notification are met, essentially meaning that the CMA needs to be satisfied that they've received a draft merchant notice that provides them with all the necessary information for them to start that pre-notification period.

It's worth noting that parties can opt out of that target. So, for more complex cases, we may well still see longer pre-notification periods, but for many cases I think that shorter timeline, shorter target will be welcome. And then, the second there is, for what the CMA regards as being straightforward cases, it's aiming to reduce the timeline for phase one clearance from 35 to just 25 working days, and that's within the overall framework of a statutory deadline of 40 working days. Now, obviously, where it achieves that target, it will bring the CMA in line with the European Commission phase one timeline, which I think will be welcome for those cases.

Harry Thimont: So, Chris, in practice then, are we seeing shorter reviews?

Chris Eberhardt: Actually, yes, we are. The early results have been quite encouraging. So, if you look at the data of the 15 phase one decisions in the last quarter of 2025, 11 were cleared within that 25 working day target. And so far in 2026, if you look at Q1, the average phase one has lasted 20 working days. So, we are definitely seeing a reduction certainly for simpler cases of the CMA's timelines.

And there are a number of ways really it's sought to achieve that. I think one of the key ones is it's said that essentially for those straightforward, simpler cases, its decisions, decisions benefit publishers once it's reached its hopefully clearest decision, will be in a much more summarized format and we are definitely seeing a significant shift here. So, just to give one example, the eBay Depop decision, which was issued and published last week, it's just seven pages long. And that really is a significant shift and a far cry from the extremely lengthy decisions that we have been accustomed to seeing from the CMA.

I think that really is a real step change and it probably also feeds into the second P, predictability. Now, predictability is something that many commentators have been saying for quite a while, to be honest, has been lacking in the UK process and lacking particularly when it comes to the application of a CMA merger jurisdictional test. And we might come back to these, but these tests essentially give the CMA really very significant discretion as to when it intervenes in mergers. Now, building upon some recent decision of practice, the CMA has issued revised guidance now, which is starting at least to clarifying its approach and providing more certainty about when the CMA will intervene.

The third P, proportionality. We are seeing the CMA really try to ensure that its actions and remedies are much more balanced, much more targeted, much more proportionate. And I think on remedies in particular, we are seeing the start of what could be quite a significant shift. The CMA has historically had a strong preference for structure remedies, but we're really now seeing it engage much more seriously with at least the potential for behavioral remedies to be appropriate in the right cases.

Harry Thimont: And Chris, perhaps just to interject briefly there, have other regulators tended to use behavioral remedies in circumstances where the CMA historically didn't?

Chris Eberhardt: I think it's fair to say that there's always been a general reticence about relying on behavioral remedies. They come with much greater cost and uncertainty for the regulator as opposed to the cleaner outcome that a structural remedy applies. But I think it's true to say that the UK and the CMA has been particularly reticent, and we've certainly seen cases where the commission, for example, other regulators may be at least willing to consider behavioral remedies when in a world where historically the CMA would've said, that's not for us, we're only going to be only interested essentially in the structural outcome.

So, as I said, the main change now is the new guidance really does explicitly acknowledge that behavioral remedies can be effective, which is a shift, it's not said that before, and says they will be assessed on a case-by-case basis. That's not to mean they'd be relevant in every case, there'll be many cases still where I expect the CMA will say, "No, this requires a structural outcome." But the very starting point of being able to assess it on a case-by-case basis has been a shift.

And as we're saying, we've starting to see that reflected in a few cases. Vodafone Three is often cited as example of that, that didn't include behavior remedies, the particular circumstances in that case that make it unique, but that was possibly a sign of a shift. And then, Schlumberger, ChampionX, which is all about the case involving delivery of services and tech to offshore drilling companies. That was cleared at phase one where package remedies, but which did include a behavioral element to one of those remedies. Now, I think both of those outcomes, they're different in their particular circumstances, but both of those outcomes would've been difficult to imagine a few years ago.

Hayley Gow: That all sounds really promising, Chris. So, one of the areas that we get a lot of questions from clients for in the M&A space is whether the CMA will seek to intervene even if the deal has little connection to the UK. Have we seen any changes to the CMA's approach to these type of deals?

Chris Eberhardt: Yes, so that's definitely one of the criticisms that's been levelled at the CMA and it's one of the areas that it's been trying to change its practice. And one of the ways it's done that is introduce what it calls a wait and see approach to international deals. Now, essentially what this means is the CMA will look to take account of action being taken by overseas competition authorities before deciding what steps it will take to ensure that its interventions then are more timely, coherent, and in particular avoid duplication.

Now, they will always give greater consideration to markets and palms that have a particular focus or impact on UK-based consumers and businesses. But I think the CMA now is less likely to intervene where markets are global and where the transaction is subject to review by the regulators or where remedies agreed in those jurisdictions will be likely to address any competition concerns in the UK.

Now, this is a new process. There are lots of questions about how it's going to work in practice and I think a key one is around timing. Is there a risk that, if you refrain from engaging with a CMA because they take a wait and see approach until late in the process, what impact could that have on deal timetables? So, I think that's a promising development, but there's a lot to work through in terms of how that's actually going to apply in practice.

Hayley Gow: So, I think we've done three out of the four Ps. What's the fourth P?

Chris Eberhardt: Fourth P, process. Yes so, I think this is, again, an area where we're seeing a significant shift. So, in order to achieve the KPIs and the shorter timelines that I mentioned at the start, the CMA has introduced actually quite a number of new measures to try and make the process of its merger reviews more efficient and this is, in particular, about trying to improve engagement with parties. I won't go through all those changes in detail, but just to give a flavor of some of them and in particular focusing on that engagement element, the CMA has now said formally that it's going to invite merging parties to hold a teach-in session during the pre-notification stage and normally actually early in that pre-notification stage so that the case team has an opportunity to better understand the industry and the merging parties' businesses really very early on.

This was a step which actually we had starting to see increasingly in more complex cases or cases involving novel or more complex companies and markets, and I think, in those cases, we'd felt it was a good development. So, I think it's a good step for the CMA to roll out more broadly and should be one that means issues that can be identified from the early stage, and that should hopefully then streamline the process and improve predictability and transparency and engagement.

And then, as well as that teach-in, the CMA now says it will hold further informal update calls during the pre-notification process or potentially in the early stages of phase one. So, really, these are all about introducing early opportunities for the parties to meet with the CMA decision makers and the CMA case team aiming to create a much greater engagement, a much more participatory process for stakeholders, giving them greater and earlier visibility about likely outcomes.

So, I think, to sum that up, we've seen really quite lots of change now under the guise of that four Ps framework. In terms of what that means in practice, we're definitely seeing faster timelines. There's potential at least more proportionate outcomes if there's greater scope for more variety of remedies. We're definitely seeing the CMA being willing to engage more with the emerging parties, and I think all of that should and hopefully is being welcomed by deal makers. And actually, these changes are almost just to start. We've seen further plans to look at the jurisdictional test. There are further changes to the CMA decision-making process, so it'd be worth continuing to watch these developments.

Hayley Gow: Thanks, Chris. We've also seen updates to the merger guidelines in both the UK and the EU. Can you tell us a bit about these changes and how they're expected to impact the reviews?

Chris Eberhardt: Yeah, sure. So, if I start with the UK, I mean actually all of the changes that we've discussed so far are reflecting the CMA's updated merger procedural guidance, which they consulted on and finalized last year. I mentioned briefly earlier, but perhaps touching on again, that one of the key areas of focus there has been on the jurisdictional tests. For those who aren't aware that the UK jurisdictional merger control regime is voluntary, you don't need to notify even where thresholds are met, but the CMA can intervene and call in transactions. And the UK tests are quite broad and the underlying legislation can extend to capture enterprises that needs to be distinct including through the acquisition of material influence, not necessarily control, but material influence is efficient. And that can apply even where a share of supply of 25% or more is created or enhanced in a central part of the UK, and that's in addition to a bit of a turnover thresholds.

These concepts have been around for a long time and the way the CMA's applied them and the way they've been interpreted by the courts has really given the CMA quite broad jurisdiction and arguably be the broadest jurisdictional reach in the world. But unsurprisingly, that comes with some criticism.

So, in the revised guidance, the CMA essentially has tried to clarify and tried to provide more certainty around its approach, and I think it's taken some steps there, although it's still retaining lots of flexibility, and as I said, there's probably more to come. In relation to material influence, for example, there's been greater clarity given as to what level of shareholding really might cause some concerns. Shareholdings are above 25% will still generally be taken to confirm material influence, that's nothing new. But for smaller shareholdings or smaller minority stakes, the CMA's new guidance says that it will only be in exceptional circumstances and with significant other factors, meaning other factors that confer influence or control beyond the shareholding when a shareholding of less than 15% would confer material influence. Again, that's sort of where we've been heading, but I think having that in the guidance now gives much greater certainty around how certainly acquisitions and minority stakes will be treated.

Harry Thimont: And Chris, just to chime in there, the acquisition of minority stakes before, say, a potential bid is something that we have seen more of in the last 12 to 18 months in UK public M&A. So, I'm sure that this will be welcomed by bid parties who may seek to adopt that tactic, i.e. acquiring a minority stake as a precursor to launching any full takeover.

Chris Eberhardt: Yeah, I think that's right. I mean, you probably start to be worried about whether transactions start to be regarded as linked and connected, but in principle, this gives greater certainty around those earlier steps. And then the second area, second element of the jurisdictional test that I think has been, to touch a great debate, is the share of supply test. And this really has come under scrutiny in recent years because of the degree to which the CMA has been willing to stretch that test to assert jurisdiction in cases which have really very limited nexus or connection to the UK. Sabre, Farelogix, Meta, Giphy are the most commonly cited examples of those. And I think this has increasingly been criticized as creating very significant uncertainty for businesses about when a particular transaction could be called in for review by the CMA.

Hayley Gow: Can you remind us what the share of supply test covers?

Chris Eberhardt: Yeah. So, the share of supply test essentially allows the CMA to review a transaction where, as a result of the merger, a share of 25% or more in the supply or purchase of any description of goods or services in the UK or even in a substantial part of the UK, which in practice can be a fairly small part like a single town, is created or enhanced. And that really has given the CMA very considerable discretion.

There are two main ways in which the CMA is starting to try to provide greater clarity around this. The first is that the CMA's guidance now confirms that it will limit its consideration to the criteria that are in the legislation. Those are value, cost priced, quantity, capacity and the number of workers employed. And that actually it will typically rely on value or volume of goods when applying the share of supply test. That's still a long list. The CMA still has significant flexibility, but I think does reflect at least some attempt to try and provide greater clarity.

And the second change is that when they are determining what that description of goods or services that's relevant for testing the share supply test is, they will primarily consider goods or services which are relevant to potential competition concerns arising from the merger. And again, I think that is a welcome step forward. Now in both share of supply and material inference, as I said, I think both further changes in these areas are expected. Government changes earlier in the year and the King's Speech back in May included a competition reform bill, which we understand will include further updates to various jurisdictional tests.

Just to wrap up on the UK, all of that's been in the context of its procedural and jurisdictional guidance. The CMA has also been looking at its substantive assessment guidelines, and in particular, it's currently consulting on revised guidance on its assessment of merger efficiencies. And this looks like under this new guidance, there'll be a much greater likelihood or possibility that arguments around efficiencies may be accepted and actually may be successful in influencing the outcome of the review. So, here we're talking about pro-competition positive benefits of the merger that might be regarded as being counter to any theories of harm or impacts on competition that could be identified. And actually, what the draught guidance now says is that the CMA will apply the same standard to assessing evidence of potential benefits as it does to assessing its theories of harm, suggesting it's going to take a much more holistic look at potential benefits of a merger, including things like what's the impact on investment and innovation rather than trying to find particular evidence that counters the harms that is identified.

So, we'll need to await the final guidance here, but this does suggest a much more flexible approach to assessing these types of benefits and greater ability for parties and their advisors to introduce our evidence and arguments around the benefits of mergers to counteract any potential harms.

Hayley Gow: Yeah, but that balancing effect seems a sensible approach. Has the EU been considering similar issues in its own guidelines?

Chris Eberhardt: It has. So, the EU has been through a parallel process in a sense of looking at its own merger guidelines. I think, in the EU in particular, there's been a lot of focus about how its merger assessment frameworks apply in the context of rapidly evolving markets in particular in digital and tech sectors. There's a focus on making sure that their guidelines are and will remain fit for purpose in light of those new markets, either due to dynamics they bring. But the commission has also been looking at how it applies deficiency defense and in the same way the CMA has been doing. And I think the new guidelines, while they largely reflect established EU merger practice, they do set out or propose a more dynamic innovation-centered approach, which explicitly recognizes the potential benefits of mergers and efficiencies they can bring. Just to give a couple of examples of that approach, first one is that the draft guidelines introduce what it calls an innovation shield.

And essentially this provides effectively a safe harbour for transactions which involve small innovative targets where obviously they meet the conditions that the guidelines will prescribe. Now, these transactions still need to be notified, but essentially, the guidance gives the acquirers or potential acquirers of those types of targets much greater certainty about when the commission is likely to have concerns and in particular the types of evidence and arguments that you can put forward that could be persuasive at ensuring the commission will clear those transactions.
And then, the second area is that the guidelines or draft guidelines provide merging parties with now much more detailed guidance on how the commission will assess the pro - competitive effects of benefits or mergers, frequently now referred to as theories of benefit, and how these will be considered alongside the commission's theories of harm or its concerns. Now, similar to the draft UK guidance, this does suggest a much greater willingness to take efficiency considerations into account. It distinguishes as we've seen before between direct efficiencies. So, the immediate cost quality benefits of the merger and a dynamic efficiencies be potentially increased incentive to invest or innovate. But also actually in the commission's guidelines, there's a much greater focus on issues like resilience and sustainability. So, looking at whether mergers might, for example, strengthen security supply and reduce exposure to supply chain shocks for companies operating in the EU.

Hayley Gow: It'll be interesting to see where the final guidance ends up. What do you think all of this is likely to mean for transactions?

Chris Eberhardt: Well, I think if we step back, I think in both the UK and EU, the regulators really are just looking at how merger control and how the assessment of mergers needs to reflect... It's a change to reflect the changing economic environments we are now operating in, in which you really need to have regard to a much greater range of factors than purely assessing the impact on competition. I think both authorities are grappling with similar challenges, how to look at competitive markets or how to look at competitive effects in markets increasingly characterized by rapid innovation, network effects, role of data. And the updated guidelines in both I think are attempting to provide much clearer analytical frameworks for these types of assessments. So, there'd be much greater scope to bring those types of arguments into play in particular relating to pro-competitive effects or other benefits of the mergers. But it's also clear that the onus is going to be on the parties to be able to evidence those arguments. and I think it's going to be a shift towards trying to engage with the regulators as soon as you can on those types of points.

So, I think as part of our deal planning and instead of part of our regulatory strategy planning, the parties should be thinking about building their efficiency arguments and the evidence early and actually ensuring that it features in the deal rationale but from the outset. There's definitely scope to bring those arguments, but I think you also need to be aware that the evidential bar is going to remain high. And as I said, the onus is going to be on the parties to put through those arguments and demonstrate that those claims are verifiable and result from this merger and ultimately are going to be beneficial to consumers.

Hayley Gow: Thanks Chris. It seems that the CMA and the European Commission have come to a similar scope as to looking forward and how to take action to amend their various guidelines. However, in the past, we've obviously seen some contrary conclusions between the CMA and the EC, i.e., Microsoft and Activision being a key example. Do we expect that these new frameworks will bring about a more convergence of approach going forward?

Chris Eberhardt: I think the answer is potentially. It's certainly fair to say that we have seen divergence and that divergence has caused real headaches for deal makers in recent years. And this is essentially a function of Brexit, whilst the UK was a member state within EU, then the CMA was unable to review mergers that fell within the commission's jurisdiction. Following Brexit, that constraint was removed and then the CMA was free to review global mergers where they satisfied the UK's, as we've seen, very flexible and broad jurisdictional requirements. So, Brexit enabled the CMA for the first time to review those large global deals. And as a result, we started to see different outcomes, and I think Microsoft Activision that you've mentioned was the culmination for that.

And I think the new frameworks do create conditions for greater convergence, but I am not sure we should overstate it. There are structural reasons as to why the commission and the CMA may reach different conclusions. There are different jurisdictional thresholds, different procedural frameworks, different legal tests. All of those I think may mean there's still a potential at least for different outcomes. I think the CMA's wait and see approach that we've mentioned earlier should help. I think that is a practical measurement mechanism. If the CMA is willing to almost defer to others for the right deals, that would obviously avoid divergent outcomes. But that process, as we discussed, obviously also comes with some risk. And I think that process and whatever we discussed doesn't mean that the CMA won't intervene and is not willing to intervene where there are transactions which it thinks will impact competition in the UK.

And we saw a clear example of this very recently with the Getty Shutterstock transaction. This didn't involve the commission, but it was cleared unconditionally by the DOJ in the US. But the CMA reviewed it, it went to phase two, and of inclusion to phase two, they required divestments. Now, ultimately, Getty has decided it can't proceed with or can't accept those divestments. It decided not to proceed with the merger. But that, again, just shows that there is the potential still for different decisions, different outcomes of jurisdictions, and also shows that the CMA will be willing to step in and hold its line where it thinks there are concerns that need to be addressed.

Hayley Gaw: Are we seeing increasing politicization of merger reviews and how do bidders deal with this?

Chris Eberhardt: Yeah, I think that's a great question. So, looking at the UK, we've certainly seen probably some quite remarkable developments in the relationship between the UK government and the CMA in the last few years, certainly developments that I don't think we would've predicted three or four years ago. So as part of the Labour government's growth agenda, there's been a significant focus on the role of regulators and regulation in the UK. In early 2025, the Chancellor Rachel Reeves called for regulators to "tear down regulatory barriers" and told them they had to undergo a cultural shift from focusing on risk to driving growth. And the CMA really has been in the cross-hairs of that, has been a focus of that. The CMA's chairman at the time, Marcus Bokkerink, was actually effectively sacked by the chancellor in early 2025. Then in May 2025, the government issued an updated five-year strategic steer to the CMA, which emphasised that the primary mission of this government is economic growth and basically gave the CMA a number of key priorities.

The first one being to prioritise pro-growth and pro-investment interventions. Secondly, to focus on markets and harms, which particularly impact UK-based consumers and businesses, and then also to support growth and competitiveness within the government's eight priority high growth sectors. And the chief executive of the CMA, Sarah Cardell, has actually expressly acknowledged now that the CMA does not operate in a political vacuum, which I think is a fairly significant statement from the head of essentially an independent competition authority. And that's as clear of a signal as you can get, I think, that the broader political environment is definitely a factor which the CMA is increasingly aware of, even if it maintains that its decisions are taken independently and analytically driven.

I think in the EU, the political context is obviously a bit different, but actually the draft guidelines that I've mentioned also expressly recognise that EU merger control has a role to play in supporting broader policy objectives such as competitiveness and resilience of the internal market and European industry. I've mentioned the focus on supply chains, for example, as part of a new guideline, which is part of that. So, I think there's a recognition, both the EU and UK, that these merger reviews can't take place in a vacuum, and there are broader political strategic considerations to take into account.

And then, in both jurisdictions, I think the regulators are clearly having to navigate a much more complicated geopolitical environment than certainly was the case five or ten years ago. In terms of what that means for bidders and what we're telling clients when they're thinking about transactions that could be affected by this, I think ultimately it creates both opportunities and also complexity. Certainly, if a transaction can be framed as contributing to growth, innovation, investment, if there's a good story to tell around those arguments, then parties should be putting those forward and regulators are and will likely be more receptive to those types of arguments. So, I think bidders should be looking to articulate the benefits of deals clearly and early on.

But on the other hand, the fundamentals of a competition analysis haven't changed. In the UK, for example, the CMA still needs to be satisfied that a merger won't result in an essential lessening of competition. It still needs to do the analysis. And ultimately that will mean that those types of deals will still be subject to quite significant scrutiny.

Harry Thimont: Thanks, Chris. And perhaps a fitting time to be discussing the politicization of merger reviews as we are recording as Keir Starmer leaves Number 10 for probably the last time. And perhaps finally, anecdotally, a number of clients have come to us in recent months with the view that merger control in the UK is now "easier." Are they right, and what are we saying to clients who are looking to do M&A in the UK on this topic?

Chris Eberhardt: Yeah, and we've heard the same feedback too. There is definitely that perception, perception that it's currently a good time to get a deal through in the UK. There might be some truth in that, but equally, I think there are still clear examples to show and confirm that problematic mergers, anti-competitive mergers will still face significant scrutiny. Hopefully, in what we've discussed, there are some positive developments for deal makers, the four Ps framework, the faster reviews, greater engagement, the updated guidelines, expanded remedies toolkit, wait and see approach. I think all of those are positive, or at least potentially so, once they continue to play through the system. But ultimately, merger reviews are rigorous. The CMA does intervene, will intervene, will call transactions in. It still reviews them rigorously and with the same analytical framework. And as we've seen, it's still willing to block or require remedies for deals that raise serious competition concerns.

Harry Thimont: Great. Thanks very much, Chris. Fascinating discussion, and it's been great to get your insights on what is clearly a very important area for clients and practitioners alike. And with that, our time is unfortunately up. Thank you, Hayley, for joining us. Chris, for your time and to our listeners, we hope you found it an insightful discussion. For our regular quarterly review of the UK public M&A market and for more information on our public M&A group, please take a look at our website. And of course it goes without saying, but if you would like to discuss any of the points raised in the materials or have any more general questions around UK public M&A, please do get in touch. You'll be able to find all of the team's details on our website. And in the words of our usual host, Jade Jack, bye for now, until next time.