South Africa's new merger notification thresholds: Key considerations

Rationale for the Revised Thresholds

The previous merger notification thresholds were last revised in 2017. In the intervening period, inflationary pressures have resulted in numerous transactions exceeding the notification thresholds despite presenting no substantive competitive concerns. This has given rise to several difficulties:

• Extended timelines: Merging parties have experienced prolonged waiting periods for merger approval;
• Increased costs: Merger filing fees and the expenses associated with regulatory investigations have imposed a significant financial burden on merging parties; and
• Administrative burden: The Commission and Competition Tribunal have been required to allocate considerable time and resources to reviewing transactions that may not have warranted such particular scrutiny.

The DTIC has recognised that updating the thresholds will benefit businesses, regulators, and the broader economy.

The increased thresholds mean that a fair number of transactions will now fall into the 'small' merger category and will not require notification. For merging parties, this has several benefits:

• Expedited timelines: There is now no requirement to wait for regulatory approval for these small mergers;
• Reduced costs: No merger filing fees or the associated legal fees with a merger filing are payable; and
• Operational flexibility: Merging parties are now able to proceed with integration planning and implementation, without the need to wait for Competition regulatory approvals.

Certain transactions that would have previously qualified as large mergers (requiring Competition Tribunal approval) are now reclassified as intermediate mergers, which is reviewed by the Commission alone. This will result in expedited approval processes and a reduced administrative burden for the Competition Tribunal.

Implications for the Market

These amendments are expected to have a positive impact on the South African market:

• Increased M&A activity: The higher thresholds reduce regulatory hurdles for transactions, which will further incentivise parties to engage in mergers and acquisitions;
• Investor confidence: Foreign investors seeking to enter the South African market, will be more inclined to engage in acquisitions in South Africa;
• Improved regulatory focus: With fewer routine transactions coming under review, the Commission and Competition Tribunal are better placed to concentrate their resources on larger transactions that may have an impact on the economy, as well as freeing capacity to undertake investigations into alleged anti-competitive conduct; and
• Economic benefits: A more efficient merger approval process generates economic growth and employment.

It should be noted that the Method for Calculation set out in Part B of the General Notice 1254 of 2017 (Government Notice No. 41245 of 10 November 2017) remains unchanged.