In the EU, like the U.S., deals under investigation are facing significant headwinds, with 33 percent of significant investigations being blocked by the EU Commission (“EC”) or abandoned by the parties in 2022. Six deals were abandoned or blocked following a Phase II investigation, the highest number ever recorded since DAMITT started tracking in 2011 and nearly 200 percent above the average between 2011 and 2021. Although deals may in theory be abandoned for various reasons, regulatory challenges were explicitly mentioned as the reason for the termination of the Nvidia / Arm transaction, and the Kronospan / Pfleiderer Polska and Kingspan Group / Trimo transactions were reportedly abandoned due to EC concerns and looming prohibitions.
If 2022 trends were to continue, a deal sent to Phase II would have only a 25 percent chance of being cleared by the EC, down from 65 percent between 2016 and 2021.
Looking at the number of significant investigations more broadly, the EC is slowly picking up pace and concluded 18 significant merger investigations in 2022. While it is an increase compared to the near-record low of 2021, this is still 13 percent below the average number of significant investigations concluded yearly between 2016 and 2021. Of note, the drop is entirely driven by a sharp decrease in Phase I remedies cases, while the number of Phase II cases remains in line with previous years.
As a positive note, compared to the number of filings, the proportion of deals undergoing a significant investigation remains relatively low, at only 4.9 percent. While this is up 1.4 point from 2021, it is still below the 5.7 percent average for the period between 2016 and 2021.
In that respect, it should be noted that although one of the mergers prohibited in 2022, Illumina / Grail, was referred to the EC based on the new interpretation of Article 22 of the EU Merger Regulation, which now allows Member States to refer deals to the EC that fail to meet EU and national reportability thresholds, this policy change has not brought about the flood of new significant investigations that observers feared. So far, Illumina / Grail is the only case in which that provision was used. However, as the General Court of the European Union confirmed the validity of the new interpretation of Article 22 in a judgment dated 13 July 2022 (case T-227/21), it is still possible that the number of such cases will pick up in the future, especially in the sectors targeted by the EC guidance (tech/digital and pharma).