EU Merger regulation under review

The European Commission has invited responses, by the end of March this year, to its proposal to grant exemptions to certain private equity investments. The idea is that private equity investments, from the point of view of European Commission competition concerns are divided into two categories; transaction investments and growth capital technology investments.

Transaction investments will remain subject to European competition approval the same state of affairs that led to CVC Capital Partners’ proposed acquisition of Lenzig being blocked on competitive grounds thanks to CVC’s existing investment in Accordis. But the Green Paper reforming EC Merger Regulation, launched in December last year, proposes that the growth technology investments classification be viewed as pro-competition because it involves start-ups in which the private equity investors have little control.

It’s difficult to envisage many early stage venture capital investors agreeing to give a company the money and just let it get on with things. It’s also difficult to imagine ventures of this sort getting onto the EU competition authorities radar, although they might if a co-investor with a competitive interest in another portfolio company enters the picture. If those weren’t issues enough to ponder there’s the actual classification procedure for what constitutes as growth technology investment and what does not.

One bit of positive news for private equity investors engaged in deals of the transaction investments category is that the Green Paper proposes those unlikely to raise substantive competition concerns be allowed to notify under the simplified Commission Notice issue of July 29, 2000 procedure. Although this is already used by a number of private equity investors allowing more through this route means they too will be able to benefit from having to submit less data per filing.