The creation, storage and importance of data snowballs daily. And this data has a direct impact on the merger control process and the timely completion of large-scale M&A transactions.
As more data is created, it has a proportional impact on the time it takes for approval, and ultimately, the cost of merger notifications.
So, how can the European merger control process successfully stick to its timelines with the explosion of data?
The Challenges
While the European Commission has concerns that a transaction could restrict competition in recent years, their reliance on internal documents to assist with their review significantly expanded.
Although the EU Commission has 90 working days to complete a Phase II investigation, it regularly “stops the clock” because of the amount of data requested. Simultaneously, it has become more complicated for companies to respond to an RFI with the requisite speed and completeness.
As this practice has become the norm for large-scale transactions, companies who find themselves in this situation face adverse effects. The risk of providing incomplete and inaccurate information is clear.
In April 2019, GE was fined €52 million for providing “incorrect information” during the EU Commission’s investigation of GE’s planned acquisition of LM Wind.
The Solutions
Fortunately, there are ways to get to grips with the masses of information companies must organise and interrogate for an RFI.
Plan and Prepare Early
Begin the process of identifying the people/custodians that the EU Commission will require internal documents from. This is likely the executive team, business unit directors and others associated with the merger decision-making process.
The EU Commission normally requests relevant data from the previous three years, so it’s important to keep track of the data. Start by identifying the types of devices your data is stored on, the physical location of those storage devices, potential data privacy issues, and issues that may arise from cross-border data transfers.
Search Terms
For RFI requests, the EU Commission regularly provides expansive search term lists. Search strings can include 500 terms or more.
This process has become fairly simple for English-language searches. However, localising the search terms into other languages is much more of an art than a science. It takes subject-matter expertise in both data processing platforms and languages.
Some companies, like TLS, have developed a specialised workflow to ensure searches conducted in multiple languages are idiomatically and syntactically accurate and return all relevant documents.
Legal Professional Privilege
The EU Commission has a strict interpretation of Legal Professional Privilege (LPP) and requires a detailed breakdown of each document considered to be covered by LPP. It often rejects claims of LPP based on search term results and requires an explanation founded on manual review.
Recent advances in technology allow for privileged documents to be identified, and auto-redaction tools significantly reduce the time and cost associated with their production.
Technology-Assisted Review
In the US, technology-assisted review (TAR) is part of the DOJ’s standard review protocol for Second Requests. TAR allows the automated review of hundreds of thousands of documents in hours with unmatched levels of consistency and accuracy.
As detailed above, the EU Commission still relies almost exclusively on search terms.
However, in 2018, the EU Commission permitted TAR for the first time in the Thales/Gemalto merger.
Putting It into Action
TLS was recently instructed on a US$60 billion transaction, where the client had 60 days to complete the forensic collection of data, document review and production of responsive data to the regulator.
Our forensic team captured 30 terabytes of data, and using Pre-Review Analytics® and advanced multi-language search term applications, we reduced this to under 410 gigabytes (about 1.5 million documents) for review.
Using a control set of 5,040 documents reviewed by a subject-matter expert, TAR identified about 222,000 documents for production. The client met the deadline and estimated the costs savings at over US$1.165 million.
What’s Next
EU Competition Commissioner Margrethe Vestager said she sees "no limit to how AI can support what we do as humans.”
Whilst the EU Commission is currently preparing a Best Practices Guideline on production of internal documents, it is only a matter of time before they follow the US methodology.
In the interim, parties should make use of TAR to prioritise their review. They can still put eyes on everything, but with the added benefit that the important documents are reviewed first.
The use of technology to complement the merger control process will become more and more prevalent in the years to come, resulting in faster investigations, reducing “stop the clock” procedures and ultimately eliminating significant, unnecessary costs for merger partners.
