When Brussels hits the brakes on M&A - A case study on the failed acquisition of Haldex AB

Sammanfattning: With an increasing number of mergers being subject to a European Commission's merger control investigation, the process becomes relevant for more and more companies engaged in M&A activities. Despite the importance to maintain healthy competition and an innovative business environment, the investigation comes along with significant direct and indirect costs for target and acquirer. In order to examine this topic, we performed a quantitative analysis of 1,635 mergers notified to the European Commission between 2013 and 2017. In addition, we conducted a case study on the failed merger between the Swedish brake manufacturer Haldex and its German competitor Knorr-Bremse. This transaction illustrates the difficulties arising in the course of an antitrust investigation and the divergent interests of the various stakeholders involved. We found that direct costs were mainly comprised of internal hours and external fees required to fulfill the authority's data requests. Indirect costs stemmed from the uncertainty for stakeholders as well as decreased strategic and operational flexibility. These indirect costs were increasing in the duration of the investigation and were mainly incurred by the target. Further, both analyses together indicated several weaknesses of the current merger control process. Despite the prescribed timeframes, especially complex investigations do often significantly exceed their theoretical time allowance. Furthermore, the pre-notification phase is not subject to any time limitation yet, thus increasing the costs and uncertainty for the target company. In combination with certain case-specific factors, the current antitrust process has the potential to significantly impede a merger, as shown in our case study.