Question

Answer

Is the seller turnover included in the €500m thresholds?

No, only acquiring party / merging parties / target / JV.

Does the FSR apply to a non-EU acquirer?

The issue is not whether the acquirer itself is non-EU; it is whether it receives FFCs from non-EU entities. An EU acquirer that has received non-EU FFCs can be caught. A non-EU acquirer that has received non-EU FFCs and that invests in the EU can be caught as well.

What should be included in the calculation of the €50m threshold?

All FFCs (of any amount and type) should be taken into account (irrespective of whether they are presumably distortive or not), unless they are excluded (parties will need to self-assess the applicability of exclusions provided for in the FSRIR).

So if the thresholds are not met, I am safe?

Be careful. Unlike EU merger control,^[4] the Commission will have the power to “call in” deals below the thresholds.

What happens if the acquirer fails to notify?

Failing to notify / early implementation can lead to penalties of up to 10% of turnover. Like EU merger control proceedings.

What FFCs should be reported in the notification form?

Only those that are presumed to be distortive.

What is a distortive FFC?

High-risk FFCs are those that amount to subsidies (a) granted to an ailing undertaking; (b) in the form of an unlimited guarantee for the debts or liabilities of the undertaking; (c) in the form of an export financing measure that is not in line with the OECD Arrangement on officially supported export credits; or (d) directly facilitating the M&A transaction.

How will the Commission apply the distortion test?

It is still unclear, but EU (State aid) precedents will provide valuable guidance.

Can I use the Form CO (merger control) to disclose FFCs?

The FSRIR provides a separate notification form called Form FS-CO. FSCs review will run in parallel to FDI and merger control reviews.

Can I file before EU Member States competition authorities?

No. Contrary to EU merger control, the EU Commission is the only authority competent to review FSCs.

Is the calendar the same as for EU merger control?

Yes, it is broadly similar, with potentially two phases: a First Phase of up to 25 business days; and a Second Phase (identification of concerns and possible remedies) up to 90 business days (subject to extensions).

Is it recommended to pre-notify?

Yes, like EU merger control, it is highly recommended.

Will this new regime increase deal uncertainty / execution?

We expect that, like EU merger control in the past, the vast majority of cases will be approved in the first phase without remedies. Still, FSR notification should be factored in deal timeline with sufficient margin, in particular in its infancy, where a lot of uncertainty remains.

Will the Commission apply the same reasoning as in EU merger control when assessing FFCs?

No, the Commission will likely rely on its many years of EU State-aid practice and precedents.

Who should report high-risk FFCs?

All parties to a notifiable deal (including the buyer and target groups).

Are PE firms / investment companies treated similarly to other acquirers?

The FSRIR provides certain exclusions for PE houses (however, they do not apply to high-risk FFCs).

What are the reporting exclusions?

FFCs granted to other (uninvolved) funds managed by the same PE company will not need to be included under certain conditions.

Are foreign-to-foreign deals caught?

Yes, as long as at least one of the merging parties, the target or the JV is “established in the EU,” a notion which is broadly interpreted (representative, branch, subsidiary, etc.).