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Mergers And Acquisition Process

Mergers And Acquisition Process
Fijian Competition and Consumer Commission chief executive officer Joel Abraham.
June 18
10:00 2018

Over the recent years, Fijian Competition and Consumer Commission (FCCC) has assessed a number of Merger and Acquisition cases in Fiji.

From the list of cases assessed, majority have been granted approval for the proposed Merger and Acquisition.

This article intends to further elaborate on the Merger and Acquisition process for enlightenment of businesses and consumers alike.

 

Information Required for Submission with Application

When a business makes a submission to FCCC for the proposed Merger or Acquisition, the applicant (acquirer) must provide the following details of itself and other information separately for any other parties to the proposed Merger or Acquisition, such as the target company, including:

Name, address (registered office), telephone number;

Contact person’s name, position, telephone number, and email address;

A description of business activities;

 Email address for service in Fiji;

 For each party to the proposed acquisition, a company structure chart identifying each party, its respective subsidiaries, and all related bodies corporate and companies in which it holds minority shareholdings that are involved in a relevant business for purposes of assessing this application; and

A current organisation chart for each party and for each of the party’s relevant businesses, identifying the key personnel with their full name, title, and contact details.

The applicant must also provide information such as the assets and/or shares to be acquired, and the structure of the proposed acquisition, including any proposed ancillary arrangements; description showing the changes that would take place in ownership post-merger or acquisition; the detailed explanation and rationale for the proposed Merger or Acquisition.

The applicant must also submit documents such as executed or most recent versions of the transaction documents, such as the sale and purchase agreement, heads of agreement, offer documents, and any related agreements; final or most recent versions of documents governing or particularising the sale process for the proposed acquisition, such as information memoranda or documents required for schemes of arrangement, takeover bids or trust schemes; and documents submitted to the applicant’s board or prepared by or for the applicant’s senior management for purposes of assessing or making a decision in relation to the proposed Merger or Acquisition, and any minutes or record of the decision made.

 

Market Information

The applicant while making a submission must also provide market information. The applicant must describe the products and/or services and the geographic areas where goods or services are supplied by the parties.

The applicant should also describe the industry or industries affected by the proposed Merger or Acquisition.

Where relevant, applicant to describe the sales process, the supply chains of any products or services involved and the manufacturing process, any upstream or downstream activities currently undertaken by the parties (including their related bodies corporate) and the detailed description of all products and services which overlap or have a vertical relationship.

Information pertaining to Competition It is a mandatory requirement that all the applicants must provide relevant information to FCCC, to enable it to undertake competition assessment of the industry, the market and the market players. The applicants must provide detailed explanation on the industry constraints, any likely change to those constraints should authorisation be granted and/or the proposed Merger or Acquisition proceeds.

The applicant must also provide information, data, evidences and address the following in its submission:

The existing or potential competitors, including via imports, to the parties;

The likelihood, sufficiency and timeliness of entry and expansion by existing and potential competitors (including costs);

The level of countervailing power of customers in the market; and

Other relevant factors which the applicant deems important for consideration.

In Addition to the above, FCCC requires the following non-exhaustive list of matters to be taken into account when assessing whether a person or entity in Merger or Acquisition would be in a dominant position to lessen or likely to substantially lessen competition in the market.

These are as follows:

  1. The number of potential players in the relevant market;
  2. The actual and potential level of import competition in the market;
  3. The height of barriers to entry to the market;
  4. The level of concentration in the market;
  5. The degree of countervailing power in the market;
  6. The likelihood that the acquisition would result in the acquirer being able to significantly and sustainably increase prices or profit margins;
  7. The extent to which substitutes are available in the market or are likely to be available in the market; h. The dynamic characteristics of the market, including growth, innovation and product differentiation;
  8. The likelihood that the acquisition would result in the removal from the market of vigorous and effective competitor; and
  9. The nature and extent of vertical integration in the market.

The above matters illuminate the policy intent underlying section 72 of Fijian Competition and Consumer Commission Act 2010.

In particular, they highlight key potential constraints on a merged or acquired firm (for example, new entry and imports) and identify market characteristics that could potentially affect the impact of a merger or acquisition on competition (for example, growth in demand, innovation or the level of vertical integration). There are other factors which are not listed here are considered by FCCC on a case by case basis while assessing the Merger or Acquisition.

 

Advise to the Traders and Business

If you are thinking of buying another business or controlling assets or shares, you must notify FCCC of the same.  It would be prudent that you visit FCCC for discussions if you are not clear which information to submit with the application or if you are intending to apply for FCCC’s clearance.

For more information/details on Fijian Competition and Consumer Commission and FCCC Act 2010, visit our website on http://www.fccc.gov.fj

Feedback:  maraia.vula@fijisun.com.fj

 

 

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