Property transactions may be subject to Irish merger control review
An interesting feature of Irish merger control law over the past number of years has been the high volume of property related merger notifications which are reviewed on an annual basis by the Competition and Consumer Protection Commission (the “CCPC”). This follows rule changes implemented in late 2014 (with the implementation of the Competition and Consumer Protection Act 2014) pursuant to which the CCPC decided, from a policy perspective, to consider the rent roll on properties (whether commercial or residential) to constitute “turnover” for Irish merger control purposes. As such, rent generating assets may be considered to constitute “a business to which a turnover can be attributed” for the purposes of Irish legislation.
Given that Irish merger control rules cover both share and asset purchases, this means that – for example – even the acquisition of a single commercial property asset (whether the acquisition of a special purpose vehicle or directly as an asset) can meet the thresholds obliging a mandatory deal notification to the CCPC if the property’s rent roll is sufficiently high.
Further, it is notable that the CCPC does not make any distinction between different categories of property, whether residential or commercial (e.g., office, retail or industrial), when determining whether the rent accrued on such properties meets the thresholds for notification.
Will I need Irish merger control approval for my deal?
The current, cumulative thresholds at which a transaction gives rise to a mandatory notification obligation under Irish merger control rules are as follows:
- The aggregate Irish turnover of the undertakings involved must not be less than €60 million; and
- The Irish turnover of each of two or more undertakings involved must not be less than €10 million.
For the foregoing purposes, “Irish turnover” means sales made or services supplied to customers in Ireland. Turnover is also calculated by reference to each of the last financial year of each of the parties (i.e., in most circumstances, the purchaser and the target entity or asset).
When calculating a purchaser’s turnover, reference must be had to the turnover of the entire group of undertakings to which the purchaser belongs (i.e., one must look up to the parent entity and take into account the turnover of that entire group, as necessary). By contrast, the turnover only of the target (whether or not it constitutes a separate legal entity) is taken into account on the vendor’s side of the transaction.
Deals that meet the foregoing thresholds are subject to compulsory notification to the CCPC, and must wait for approval to issue, prior to deal implementation. Failure to notify constitutes a criminal offence, potentially attracting fines of up to €250,000. In addition, a non-notified transaction is considered void as a matter of Irish law, which may have significant implications from a title perspective for any future sale.
What does this mean in practice?
In simple terms, if a transaction involves the purchase of a property or properties which, cumulatively, generate annual rent of over €10 million, then there is a strong possibility that the transaction in question will be subject to mandatory Irish merger control notification to, and approval of, the CCPC. The determining factor in such circumstances will then be whether the combined Irish turnover of the purchaser and the target asset are, cumulatively over €60 million.
In practice, there have been a highly significant number of property deals notified to the CCPC over the past seven years. Indeed, at one stage up to one in six deals notified on annual basis involved some form of property-related transaction. This trend has slowed in recent years following an increase in the applicable level of financial thresholds in 2019. However, recent examples – such as the acquisition of a number of office blocks (Burlington Plaza and the Three Building and Whitaker Court) by the Blackstone Group – show that deal notification is a live concern for all parties involved in significant value property transactions.
Please contact Ronan Dunne or Daniel Hanrahan of the EU, Competition and State Aid law group, or your usual Philip Lee contact, should you like any further information concerning the matters discussed in this briefing note.