Executive Summary
Effective at January 30, 2014, Federal Law 423-FZ dated December 28, 2013 ends regulations requiring the subsequent notification of Russian competition authorities of corporate transactions of minor value as well as some intra-group transactions. The amendments to the merger control regulation would have a positive affect the entire Russian M&A market.
Main Article
The Russian government continues to move towards the liberalisation of the regulatory framework of mergers and acquisitions. Recent changes to the merger control regulations are aimed to ease sub-middle market deals. Consequently, after January 30, 2014, the majority of transactions which had previously been notified to the national competition authority (FAS) will no longer have to.
Current Regulation (before January 30, 2014)
Basically, the Russian merger control regulation recognises two kinds of control – prior approval and subsequent notification.
A corporate transaction requires prior approval if the combined total book value of assets of the undertakings concerned exceeds seven billion rubles (150 000 000 euros) or their total revenue for the preceding financial year exceeds ten billion rubles (214 000 000 euros) and the book value of assets of the target is more than 250 000 000 rubles (5 400 000 euros).
In general, subsequent notification is required for a corporate transaction where the combined total book value of assets of the undertakings concerned or their total revenue for the preceding financial year exceeds 400 000 000 rubles (8 500 000 euros). In case of equity acquisition, the combined total book value of assets of the undertakings concerned or their total revenue for the preceding financial year must exceed 400 000 000 rubles and the book value of assets of the target is more than 60 000 000 rubles (1 300 000 euros).
Also, certain corporate transactions which would otherwise require prior approval, made between the members of the same group could qualify for subsequent notification.
Post January 30, 2014
Effective January 30, 2014, Federal Law 423-FZ of December 28, 2013 abolishes regulations requiring subsequent notification of FAS of corporate transactions of smaller value. Likewise, corporate transactions triggering a prior approval threshold but carried out between subsidiaries, e.g. a parent undertaking and a subsidiary, are no longer within the merger control rules. Hence, this method of governmental merger control will only be reserved for some intragroup corporate transactions.
Aftereffect
Appearing as a minor regulatory fix, the amendments to the merger control regulation would result in hundreds of thousands of euros of legal fees for tedious filing work saved resulting in a more efficient spend in more meaningful areas. This is because a typical filing for merger clearance of a small or even an intragroup transaction is substantially no different than for a large M&A deal and could be some 500-1000 page bundle of legal and financial documents.
These changes will not only affect small and mid-market where the presence of governmental antitrust protection has been questionable. Considering that in many cases large corporate transactions are preceded by internal restructuring, overcoming additional regulatory constraints could be burdensome, especially in terms of timing. Therefore, the new regulations will have positive effect on larger deals as well.
This paper was authored by Vyacheslav Yugai, Senior Associate, EPAM.