The regulatory bodies that govern Mergers and Acquisitions

The Competition Commission
The Competition Commission is a regulatory body established in accordance with the Competition Act, 89 of 1998 ("Competition Act"), with the power to investigate, monitor, and assess anticompetitive business practices, collusion, and mergers to foster healthy competition within the South African economy.

Despite the existence of the Competition Commission, the statutory body does not review every transaction, thus, the initial stage of each M&A is to determine whether such M&A transaction necessitates the Competition Commission’s approval.

As per Section 12 of the Competition Act, a merger occurs when one or more firms directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another firm. The term “firm” in this sense refers to not only companies but to a person, partnership, or trust. The term control is a critical factor to take into account because having control may be perceived as having the ability to affect how a corporation is run.

Takeover Regulation Panel

The Takeover Regulation Panel (TRP) was established in terms of Section 196 of the Companies Act, 71 of 2008 (“Companies Act”), and the TRP has a different modus operandi to that of the Competition Commission. The TRP operates predominantly in terms of Chapter 5 of the Companies Act together with the Takeover Regulations which appear in Chapter 5 of the Regulations to the Companies Act.

The objective of the TRP is to administer and regulate M&A transactions, to ensure that M&A transactions are conducted in a way that protects not only the shareholders but are in the best interests of the public. Its primary objectives include – 

(i) overseeing takeovers;
(ii) safeguarding market integrity and shareholder fairness; and
(iii) preventing target company acts that obstruct, hinder, or defeat an offer or the ability of shareholders to make fair and informed decisions.

Two pertinent questions arise to determine whether the TRP must consider an M&A transaction. Firstly, whether the company is considered to be a “regulated company”, and secondly, whether or not the M&A transaction in question indeed constitutes an “affected transaction” as defined in the Companies Act.

Broad-Based Black Economic Empowerment Commission

Similar to the regulatory bodies mentioned earlier, the B-BBEE Commission is no different, as it was established in line with legislation, namely as per Section 13B of the Broad-Based Black Economic Empowerment Act 53 of 2003 (“BEE Act”). 

In the context of M&A transactions, the B-BBEE Commission plays a significant role as a regulator and the outcome of an M&A transaction, specifically in relation to the BEE position of the companies involved after the conclusion of an M&A transaction. This is because the B-BBEE Commission and the Competition Commission recently established a joint working committee. Thus, the resultant BEE impact of every M&A transaction is taken thoroughly into consideration. 

In a nutshell, the B-BBEE Commission assess whether transactions are consistent with the transformation objectives set out in the BEE Act. Therefore, one must always consider the effect that the proposed M&A transactions pose on black beneficial ownership.

Depending on the nature of the M&A transaction, various other regulatory bodies may have to be involved in a specific transaction. For example, the Financial Sector Conduct Authority (FSCA) oversees financial institutions such as banks, insurance companies, and investment firms. While not directly involved in M&As, it plays a role in ensuring that such transactions within the financial sector comply with regulatory standards
Stay tuned for our follow-up articles where we’ll explore key aspects of M&A transactions in depth.

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 

January 28, 2024
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