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Business and legal aspects of cross-border M&A under scrutiny of the Merger Regulation 4046/89/EEC

Cini, Vlatka (2004)
Department of Business Administration
Abstract
The European Union (EU) is heading for an increased economic, legal and political integration of its Member States. In spite of all the efforts to bring the people of Europe closer, significant differences in national laws and cultures still exist. Enhanced understanding of such disparities can create opportunities for companies operating on the EU market in several areas, including the way to deal with mergers and acquisitions (M&A). In this thesis mergers are considered as a full joining of two previously separate corporations into a newly created third entity, whereas acquisitions are defined as assuming ownership of another business, either through a friendly acquisition or a hostile takeover. It is often disputed whether all M&A... (More)
The European Union (EU) is heading for an increased economic, legal and political integration of its Member States. In spite of all the efforts to bring the people of Europe closer, significant differences in national laws and cultures still exist. Enhanced understanding of such disparities can create opportunities for companies operating on the EU market in several areas, including the way to deal with mergers and acquisitions (M&A). In this thesis mergers are considered as a full joining of two previously separate corporations into a newly created third entity, whereas acquisitions are defined as assuming ownership of another business, either through a friendly acquisition or a hostile takeover. It is often disputed whether all M&A should be allowed according to the free market principles or if a certain institutional body should have the competence to control them for the purpose of preserving the competition and protecting the consumers. The EU’s choice for the latter originates from the EC Treaty, where it is clearly worded that its main goal is not only free market development, but also increased employment, social protection, environmental standards etc. Even though the EU legislation on M&A applies to all the Member States equally, various areas remain uncovered. This thesis points out some difficulties the companies have experienced in dealing with M&A within the Community and it seeks to raise awareness of available options to improve future actions. As regards the legal considerations, M&A are analysed mainly from the competition law angle, whereas business administration considerations is approached in the light of human resources management. The main purpose of this paper is to determine how companies can explore the ambiguities in the EU merger control legislation and to analyse what effect it has on various market participants in the light of cross-border M&A. M&A gained rather bad reputation in the recent years, resulting in a drastic decrease of such practices. Possible reasons of M&A failures are scrutinized in order to define solid grounds on which M&A might regain their popularity. The subject is approached from a legal and a business perspective, but the macroeconomic environment and political forces are occasionally addressed. The thesis is analysing the impact of the existing competition rules on M&A within the EU and it underlines possible solutions to controversial issues based on these findings. Legal perspective.
After the initial phase of cross-border M&A is thoroughly worked out, companies still have a long way ahead before being able to realize their intentions. Namely, the EU legal requirements must be satisfied before a merger or an acquisition can be granted a clearance. Although the competition rules may seem to be clearly formulated in theory, there is a considerable lack of certainty once they should be applied in practice. The wording typically follows general principles arising from the EC Treaty, but its scope is repeatedly challenged. This thesis discusses the M&A effects in the EU from the legal perspective, highlighting the problems that companies have been faced with since the Merger Regulation 4064/89/EEC was adopted in 1989. After it became applicable in September 1990, the European Commission was empowered to carry out the one-stop-shop control. The Regulation was considered to be a modern and effective tool for merger supervision. The new Merger Regulation 139/2004/EC entered into force in May 2004, creating even higher transparency of the EU competition rules. The EU case law is continuously evolving, sometimes in rather unexpected directions, often raising a lot of criticism. Nevertheless, it has provided valuable guidelines for the future. It appears that the Commission is seeking to encourage cross-border M&A, but the companies, especially the ones from the continental Europe, are limiting their positive attitudes co (Less)
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author
Cini, Vlatka
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
M&A, Merger Regulation 4064/89, stakeholders, Management of enterprises, Företagsledning, management
language
English
id
1346649
date added to LUP
2004-06-01
date last changed
2012-04-02 15:02:03
@misc{1346649,
  abstract     = {The European Union (EU) is heading for an increased economic, legal and political integration of its Member States. In spite of all the efforts to bring the people of Europe closer, significant differences in national laws and cultures still exist. Enhanced understanding of such disparities can create opportunities for companies operating on the EU market in several areas, including the way to deal with mergers and acquisitions (M&A). In this thesis mergers are considered as a full joining of two previously separate corporations into a newly created third entity, whereas acquisitions are defined as assuming ownership of another business, either through a friendly acquisition or a hostile takeover. It is often disputed whether all M&A should be allowed according to the free market principles or if a certain institutional body should have the competence to control them for the purpose of preserving the competition and protecting the consumers. The EU’s choice for the latter originates from the EC Treaty, where it is clearly worded that its main goal is not only free market development, but also increased employment, social protection, environmental standards etc. Even though the EU legislation on M&A applies to all the Member States equally, various areas remain uncovered. This thesis points out some difficulties the companies have experienced in dealing with M&A within the Community and it seeks to raise awareness of available options to improve future actions. As regards the legal considerations, M&A are analysed mainly from the competition law angle, whereas business administration considerations is approached in the light of human resources management. The main purpose of this paper is to determine how companies can explore the ambiguities in the EU merger control legislation and to analyse what effect it has on various market participants in the light of cross-border M&A. M&A gained rather bad reputation in the recent years, resulting in a drastic decrease of such practices. Possible reasons of M&A failures are scrutinized in order to define solid grounds on which M&A might regain their popularity. The subject is approached from a legal and a business perspective, but the macroeconomic environment and political forces are occasionally addressed. The thesis is analysing the impact of the existing competition rules on M&A within the EU and it underlines possible solutions to controversial issues based on these findings. Legal perspective.
After the initial phase of cross-border M&A is thoroughly worked out, companies still have a long way ahead before being able to realize their intentions. Namely, the EU legal requirements must be satisfied before a merger or an acquisition can be granted a clearance. Although the competition rules may seem to be clearly formulated in theory, there is a considerable lack of certainty once they should be applied in practice. The wording typically follows general principles arising from the EC Treaty, but its scope is repeatedly challenged. This thesis discusses the M&A effects in the EU from the legal perspective, highlighting the problems that companies have been faced with since the Merger Regulation 4064/89/EEC was adopted in 1989. After it became applicable in September 1990, the European Commission was empowered to carry out the one-stop-shop control. The Regulation was considered to be a modern and effective tool for merger supervision. The new Merger Regulation 139/2004/EC entered into force in May 2004, creating even higher transparency of the EU competition rules. The EU case law is continuously evolving, sometimes in rather unexpected directions, often raising a lot of criticism. Nevertheless, it has provided valuable guidelines for the future. It appears that the Commission is seeking to encourage cross-border M&A, but the companies, especially the ones from the continental Europe, are limiting their positive attitudes co},
  author       = {Cini, Vlatka},
  keyword      = {M&A,Merger Regulation 4064/89,stakeholders,Management of enterprises,Företagsledning, management},
  language     = {eng},
  note         = {Student Paper},
  title        = {Business and legal aspects of cross-border M&A under scrutiny of the Merger Regulation 4046/89/EEC},
  year         = {2004},
}